School Funding Formula and Northern Schools

Tuesday 17th January 2017 Westminster Hall

11:00

[Mr Gary Streeter (in the Chair)]

Colleagues, we move on to our next debate, which is also about an important matter: the school funding formula, which the Government have introduced and we are all very excited about.

[John Pugh (Southport) (LD)]

I beg to move,

That this House has considered the school funding formula and Northern schools.

It is a pleasure to serve under your chairmanship, Mr Streeter—it is a first for me. The circumstances of the debate are strange in so far as I originally put in for a one-hour or 90-minute debate, knowing that many parliamentary colleagues were exercised about this topic. I did not win the lottery for an Adjournment debate, but a half-hour slot became available and Mr Speaker offered it to me, so I thought I would go ahead and try to condense this important subject into half an hour. However, I do apologise, Mr Streeter, because you could have had a range of eloquent speakers addressing the subject but unfortunately you will have to listen simply to me droning on. I am sure this will be the first of many such debates for the Minister, because the national funding formula will be contentious in many places, not only in the north, and I dare say he will have an opportunity to rehearse some well-tried Department for Education lines in defence of it.

The Government set themselves a laudable task: to close the north-south gap in educational attainment. I am a little sceptical about the gap because “the north” is often seen from London as an undifferentiated mass. I was brought up on BBC weather forecasts in which the presenters went into great detail about the weather on the south coast and in London, and then they would glibly say, “but in the north it will be” and use that blanket label for the entire area anywhere north of Watford. The tendency is to see the north as a homogenous culture, possibly peopled by men in flat caps with whippets and living with constant drizzle. However, I looked further into what the Government meant by the educational gap—I had to address what the evidence showed—and, if we control for factors such as income and deprivation and exclude pockets of genuine excellence, we see that outcomes for northern secondary schools are inferior to those found in London and the south-east. Primary schools show less evidence of a northern problem.

I am not sure whether the difference we see would be so stark if we excluded those areas that have benefited from schemes such as the London challenge, which has been a successful concentration of money and resources. I met recently with Anne Longfield, the Children’s Commissioner, whom the Government charged with testing some of the assumptions underlying the project. The principal one seems to be the belief that if we have an educational problem, it is capable of an educational fix. The commission has suggested that other things could be taken into account: for example, parents in the north could be a bit pushier.

In a report for the previous Chancellor, Sir Nick Weller, who works for an academy chain, suggested unsurprisingly that the north could do better with more academy chains—and, incidentally, better teaching. Proponents of grammar schools have not been slow to suggest that what we need in the north is more grammar schools. The Minister will be aware of the study done by ResPublica in Knowsley, which suggested that grammar schools might be a panacea. However, to my certain knowledge, Knowsley has had grammar schools since 1544—I was once a pupil at Prescot grammar school.

The harsh reality is that, in order to change aspiration in the north, we need to do more than change school structures, because the reality that dawns on adolescents in the north is that opportunities are more limited compared with those they might face in the south, regardless of the education they receive. That is why so many young people gravitate to the south, particularly after their degrees; why there are more start-ups in the south; why the south is a magnet; and why the south has critical mass. Young people’s aspirations are simply less when there is less around them to aspire to—it is a chicken and egg dilemma. If we factor in limited parental optimism based on a degree of experience in the north and the limited opportunities available to those who are industrious but not especially talented, is it surprising that the optimism of childhood dwindles as schooling progresses and aspiration and attainment falls? I suggest that correcting that is beyond the scope of the school system alone; it involves regeneration of the whole community to which the child belongs.

That said, we all recognise that education plays a key part in regeneration. It is worth funding, and it is worth funding properly. I am far from believing that good funding is a sufficient condition of educational progress. Were that so, many schemes in the past would have worked far better than they have done. If we think about the money spent over the years in places such as Knowsley to provoke better educational outcomes, we would expect far superior outcomes to those we got. I do, though, note that, according to the Institute for Public Policy Research, £900 less is spent per primary school pupil in the north and at secondary schools that figure goes up to £1,300. That could go part of the way to explaining the significant difference in outcome. However, it is probably fairer to regard good funding as a necessary rather than a sufficient condition. In that respect, the Government’s revision of the school funding formula leaves a little to be desired. Indeed, its effects in some places will probably be catastrophic.

I recognise that no one will oppose a national school formula in principle because it sounds fair on paper, given that we have the effective nationalisation of school funding anyway through the dedicated schools grant. The current situation looks unfair and anomalous partly because of national decisions, but also because of the history of local decisions. We must look at that and see where that has led us.

When local education authorities were important—I do not suggest that they are not important at the moment—some bravely took decisions to sustain or increase budgets while others, less concerned about education, cut school funding to appease ratepayers and council tax payers. A feature of the new system is that that degree of discretion has simply gone, and councils charged with regeneration have lost all real leverage over the educational system. That is regretted by councils now, and clearly it will be also be regretted later on by city region cabinets and by Mayors as they get their hands on the levers of power, because they will want to prompt regeneration but they will lack some of the active levers that would enable them to do that.

I was a council leader in Sefton borough, and during tough years in the 1990s and so on we put money into school funding, sometimes at the cost of other services, because we regarded that as a high priority, and schools were therefore well funded—in fact, they were so well funded that sometimes the council dealt with its financial problems by borrowing from the schools’ balances. However, that was something we could do locally; it was a way in which we could emphasise our commitment to education in the area.

However a new formula is dealt with, it will obviously not please everyone. There will be winners and losers; but the background to the present situation is somewhat unpromising. The cost pressures on schools, such as national insurance, pension increases and school-based inflation, significantly outweigh the projected funding settlement for the sector. The Minister knows—and I think that we will all get to know—that the National Audit Office has vividly set that out. Its report will be investigated in greater detail at a hearing of the Public Accounts Committee, probably next week. To give the House a flavour of it, the NAO concludes that despite modest real-terms increases, the cost pressures on schools and increases in pupil numbers will result in a real-terms reduction of something like 8%. That is the NAO’s figure, not mine or that of a think tank or political party.

[Liz McInnes (Heywood and Middleton) (Lab)]

I am grateful to the hon. Gentleman for bringing this important debate to the Chamber. It is not just the NAO’s figure. I have had letters from headteachers of schools in my constituency who say they appear to be facing an 8% cut in real terms, and that that will lead to schools either going into deficit or having to make devastating cuts, having already made many efficiency savings.

[John Pugh]

Yes; they are mandated to make further efficiency savings.

Interestingly, on page 14 of the document, the NAO states that schools

“have not experienced this level of reduction in spending power since the mid 1990s.”

It may be pure coincidence, Mr Streeter, that there was a Conservative majority Government in the mid-1990s, but I draw your attention to that. Impacts will be worse on secondary schools; the NAO said that the number spending above income has increased from 33% to 59%. Not only has the number gone up but the size of the deficits that are being handled has gone up. If we add to that the disappearance of the education services grant, the fact that—as the hon. Member for Heywood and Middleton (Liz McInnes) mentioned—schools are expected to find £3 billion of efficiency savings, and the cost of implementing endless Government initiatives, we have what most of us would describe as a perfect storm, and an absence of financial sustainability.

What is most interesting in the NAO report is what schools appear to be doing to respond to the looming crisis that they can see all too clearly, as the hon. Member for Heywood and Middleton suggested. According to the NAO, they are, generally, increasing class sizes, adjusting teacher contact time, reducing supply cover, replacing experienced staff with less qualified temporary staff, and hiring more bureaucrats to manage the finances as heads become not school leaders but accountants. An odd feature of the situation is that schools are spending less in percentage terms on teaching staff than they were. They are shoring up balances to cope with anticipated deficits and potential redundancies. If they are really unlucky, they must also deal with increasing PFI payments, which are the endowment of a Labour Government.

None of that is conducive, most of us would agree, to educational progress. Some areas of the north are already in fairly dire straits. Cumbria is one example. The NAO report was complete before the Government’s new national funding formula went out to consultation, but it has already altered people’s take on the consequences of the new national formula. The realisation is dawning that the formula is not universally good news and that it will do little to offset a particularly bleak outlook.

We must accept that the redistribution of diminishing resources will always have a predictable outcome. In the north the consequences are severe—certainly in the mid to long term. After inner London, the north-west of England benefits least from the general distribution away from London. However, within that regional profile there are significant losers—for no obviously good reason. The worst affected include Manchester, Kirklees, Wigan, Cheshire, Liverpool and Sefton, whether or not we make allowances for floors and ceilings or the 1.5%. Those areas are key components of the northern powerhouse.

When we drill down to the consequences for particular schools, the position is even more frightening. Christ the King school in Sefton in my constituency—the school that my children went to—is scheduled to lose £426,000, or £441 per pupil. Greenbank high school is scheduled to lose £527,000, or £558 per pupil. Down the road in Sefton Central, Formby high school and Range high school are scheduled to lose similar amounts.

I find it ironic that the situation I am now lamenting as an MP is one that I sought assiduously to forfend and prevent as a council leader. Had we in Sefton not, on a cross-party basis, sought to protect the education budget over many years and given schools both enormous financial independence and active support, the shock and the comedown of the national formula would not have been so severe. Paradoxically, a great strength of Sefton has been its tight network of primary schools. A perverse consequence of that is that, under the new formula, handing children on to secondary schools with good prior attainment de facto damages the budgetary position of the secondary schools, and their ability to sustain progress. That is the particular way in which the formula is rejigged. I think the Minister will understand the point I am endeavouring to make.

I hope that the Minister is taking account of what I am saying. I want to put it in a constructive fashion and put my sentiments across in a helpful rather than a wholly negative way. However, the Department for Education is not famous for its listening skills. I speak to many people to whom the Minister and the Department also speak, and I do not hear a constant refrain about the Department being particularly good in that area. At times it has shown an active contempt for those who have brought it messages it did not want to hear, but it is not malicious—I give it credit for that. It wants to help. It offers financial health checks and warnings from school commissioners. It even makes videos to be helpful, because it is genuinely ambitious for schools and genuinely keen on across-the-board improvements in the north.

However, I can see from my analysis no obvious reason why schooling in the north would change for the better in the present circumstances. Many of the ingredients for improvement that were seen in the London challenge are missing. The London challenge had sufficient predictable funding, although unfortunately that will go under the new formula, I think, and there will be rather less funding. Another thing it had going for it was collaboration, but the school system is now more fragmented than ever, with schools that are financially and academically weaker fearing takeover. The London challenge had clear, effective leadership, but heads are now stressing over finances and personnel management rather than the main issue, and local authorities are withering away.

The demise of the local authority has acute effects. Its statutory functions are barely affordable at the moment, given the pressure on council budgets, but following the phasing out of the ESG, its other strategic functions will be dependent on funding from schools that cannot afford to meet their own costs, let alone to pay back and hire local authority services. Ironically, back-office services, which are growing in individual schools, are one area in which schools can get good money from a local authority, from collaboration through the sharing of services. We need only look at the increased problem that primary academies are having with meeting back-office costs to realise that.

I have not come here simply to present the Minister with problems to which there are no obvious solutions. The solution is to recognise that we have a problem and to engage in a debate with headteachers, who have no particular political axe to grind but are now looking at a worrying landscape. That headteachers in the north are looking at that worrying landscape should give us no confidence that any attempt, by commissioners or whomever, to raise educational standards in the north and to deal with long-standing problems will be properly and sustainably addressed. With that plea and that degree of pessimism, I will sit down.

11:20

[The Minister for School Standards (Mr Nick Gibb)]

It is a pleasure to serve under your chairmanship as always, Mr Streeter. I start by congratulating the hon. Member for Southport (John Pugh) on securing this important debate. He is right—this is one of a number of debates we will undoubtedly have as we consider the second stage of the consultation on our national funding formula. We will debate funding in Devon tomorrow, and I am looking forward to that debate as I much as I have looked forward to this one. This is part of a process of consultation on the second phase, in the same way as we consulted on the first.

The Government are committed to improving educational outcomes in the north, and reforming the funding system is essential to underpinning that ambition. Although I represent a southern constituency, I spent many years of my childhood living in Leeds and Wakefield in the 1970s, and I do not recognise some of the hon. Gentleman’s comments on the opportunities available for people in the north. The hon. Gentleman spoke of cost pressures on schools in general, and in the north in particular. Through our careful management of the economy, we have been able to protect the core schools budget in real terms, which means that schools are receiving more funding than ever before for children’s education—more than £40 billion.

We of course recognise the cost pressures facing schools, and we will therefore continue to provide advice and support to help schools use their funding in cost-effective ways and improve the way in which they buy goods and services, so that they get the best possible value for their pupils. We have published a wide range of tools and support on gov.uk, including support for schools to review their level of efficiency, to investigate expenditure levels of similar schools and to take action to improve efficiency in practice. We are also launching a schools buying strategy that will support schools to save more than £1 billion a year by 2019-20 on non-staff expenditure. It will help all schools to improve how they buy goods and services, allowing them to invest more in high-quality education for their pupils.

As well as helping schools make the best use of their resources, we urgently need to reform the unfair system that currently distributes funding across the country. The Government are committed to creating a country that works for everyone no matter where they live, whether in the north or south, in a city or the countryside. Whatever their background, ability or need, children should have access to an excellent education. We want all children to reach their full potential and to succeed in adult life. We know that the current schools and high needs funding system does not support that aspiration—it is unfair, untransparent and out of date. Similar schools and local areas receive different levels of funding with little or no justification.

For example, secondary schools in Darlington receive an additional £40 for each pupil with low prior attainment—pupils who did not reach the expected standard at primary school—but secondary schools in Richmond upon Thames receive £3,229 for such pupils, which is a difference of more than £3,000. We do not only see such differences by comparing the two ends of the country; sometimes it can be a matter of a few miles down the road. For example, a 13-year-old pupil from a deprived background for whom English is an additional language would attract £5,150 to their school if they lived in Redcar and Cleveland; next door in Stockton-on-Tees, that same pupil would attract £8,242 to their school, which is an addition of more than £3,000.

The huge differences in funding that similar areas receive to educate similar pupils are clearly not sustainable. Underfunded schools do not have access to the same opportunities to do the best for their children. It is harder for them to attract the best teachers and to afford the right support, which is why introducing fair funding was a key manifesto commitment for the Government. We need to introduce fair funding so that the same child with the same needs will attract the same funding, regardless of where they happen to live. That is the only way that parents can be sure that there is level playing field.

We launched the first stage of the consultation on reforming the schools and high needs funding systems in March 2016. That consultation set out our principles of reform and our proposals for the design of the schools and high needs funding system. I am grateful to the more than 6,000 teachers, headteachers, governors, local authority representatives and others who took the time to respond to that consultation, and I am pleased that our proposals received wide support.

In the light of that, we are now consulting on the detailed proposals for the design of the schools and high needs funding formula. We have also published illustrative allocations data, so that every school and local authority can see the impact of the proposals. The second stage of the consultation will run until 22 March, and we are keen to hear from as many schools, governors, local authorities and parents as possible. I welcome this debate as a valuable addition to that consultation.

Our proposed formula would result in more than 10,000 schools throughout the country—54% of all schools— gaining funding, with a quarter of all schools gaining more than 5.5%. Those that are due to see gains will see them quickly, with increases of up to 3% in per-pupil funding in 2018-19, and up to a further 2.5% in 2019. Our formula will target money towards pupils who face entrenched barriers to their success, particularly those who are deprived and those who live in areas of deprivation but who are not necessarily eligible for free school meals—those whose families are just about managing. We are putting more money towards supporting pupils who have fallen behind their peers, in both primary and secondary school, to ensure that they get the support that they need to catch up.

Our proposed national funding formula will see gains for schools right across the north. In the north-east, schools will see an average 1% increase, while schools in Yorkshire and the Humber will see a 1.5% average increase. I acknowledge that the outcome will be more mixed in the north-west, but schools there will also be small gainers on average under our proposals. I recognise that our proposals would result in budget reductions for schools in the constituency of the hon. Member for Southport, but I nevertheless believe that our proposed formula strikes the correct balance between the core schools budget, which every pupil attracts, and the extra funding needed to target those with additional needs.

[John Pugh]

I probably made my point quite imperfectly. Can the Minister assure me that if a secondary school—those are the worst-affected schools in this respect—is in an area in which primary schools have made good progress, and the children who are handed on to them are therefore attaining the expected level and do not enter the secondary school with poor prior attainment, that secondary school will not lose out simply because it has good feeder schools? That scenario would discourage the kind of collaboration between secondary schools and feeder primary schools that the Minister wants to see, because it would almost be in the vested interest of the secondary schools to have incompetent feeder primary schools—from a financial point of view, if not an academic one.

[Mr Gibb]

I do not accept that argument. It is important to ensure that schools—primary or secondary—are well funded for pupils who start school academically behind their peers. I do not believe that any professional I have ever met would deliberately not collaborate with another school to improve pupils’ attainment simply to attract an element of the funding formula. Of course, the biggest element of it depends on deprivation, whether measured by receipt of free school meals or by children in one of the lower IDACI—income deprivation affecting children index—bands. That is important to ensure that children from those areas are properly supported.

The hon. Gentleman managed to mention Manchester, Kirklees, Liverpool and Sefton. However, he forgot to mention areas that will receive an increase in funding under the proposed funding formula, including 1.7% in Durham and Gateshead; more than 2% in Newcastle; nearly 3% in south Tyneside; nearly 2% in Sunderland; 3.4% in Blackpool; 4.3% in Bury; 4.9% in Knowsley; and 4.3% in Leeds. Schools in northern urban areas will continue to be highly funded; even areas that will see a small reduction under the proposed national funding formula will still be some of the highest-funded in the country, including Manchester and Liverpool, which the hon. Gentleman mentioned. That is right, as those areas have higher levels of socioeconomic deprivation and children with additional needs. Matching funding to need will see schools in those areas funded higher than those elsewhere in the country. A secondary school pupil with significant additional needs could attract more than £10,000 to their school through the proposed national funding formula and the pupil premium.

While introducing these significant reforms to the funding system, we are also delivering stability. We have listened to those who have highlighted the risks of major budget changes.

Motion lapsed (Standing Order No. 10(6)).

11:30

Sitting suspended.