School Funding Reform

Andy Burnham Excerpts

Tuesday 19th July 2011 Commons Chamber

[The Secretary of State for Education (Michael Gove)]

With your permission, Mr Speaker, I should like to make a statement on our plans to reform school funding. As Members across the House will know, the current systems for funding schools—both their revenue and capital needs—are too complex and lack transparency, which is why I want to make the way we fund all schools fairer, simpler and more efficient.

I want to turn first to capital spending. Capital investment is crucial to education reform, but at a time of economic difficulty we need to ensure we are getting the maximum value for every penny we spend, and we must ensure that tight resources are targeted on those most in need.

In order to ensure that we could target money on those areas in absolutely greatest need, last year I had to take the difficult decision to stop a number of school rebuildings planned under the Building Schools for the Future programme. In areas where planning was most advanced, more than 600 projects will go ahead, but other projects were stopped. I recognise the deep disappointment that was provoked in communities where hopes had been raised, but we had to ensure money was spent efficiently, and the design of the old BSF scheme was not as efficient as it could have been. Specifically, it did not prioritise schools in the worst condition and it did not procure new buildings as cheaply as possible.

In order to ensure that we spent money properly, I asked Sebastian James of Dixons store group to review the entire Department for Education approach to capital funding. His report makes compelling reading and I commend it to the House. He found that the whole capital system was bedevilled by a complex allocation process with multiple funding schemes, a lack of good- quality building condition data, inefficiency in building design, a lack of expertise in improving new buildings, a failure to make procurement as efficient as possible, a lack of clarity on maintenance, and overly complex regulatory and planning requirements. I am grateful to Sebastian James for his exceptionally thorough work, and I wish to accept the majority of his recommendations, subject to a thorough consultation process over coming months.

Specifically, I have accepted the recommendation to conduct a full survey of the school estate. The last Government stopped collecting any data on school condition in 2005, which has made fair distribution of funding much harder. I have also accepted the review’s recommendation significantly to revise the school premises regulations, so that a single, clear set of regulations applies to all schools. I intend to consult fully on this in the autumn. In addition, I have accepted the recommendation to move towards greater standardisation of design. One of the aspects of the BSF programme that Mr James criticised was that each school was separately designed, costing unnecessary millions in consultancy fees and often resulting in buildings that were not fit for purpose. Greater standardisation will reduce costs, improve quality, and limit the opportunity for error.

However, I recognise that in the short term schools around the country are facing real and pressing problems. The most pressing problem is ensuring that every child has a school place. In some local areas, there are simply not enough school places to meet rising demand. Local authorities have told me that insufficient attention has been given to this issue in the past, which is why I have already doubled the sums available to meet this pressure, announcing £800 million of additional spending given directly to local authorities to meet the demand for school places. Today, thanks to efficiencies and savings that we have identified, including in BSF projects, I can announce an additional £500 million to fund more new school places in the areas of greatest need.

Funds will be allocated this financial year to the local authorities with the greatest demographic pressures so that they can provide enough places, especially at primary schools, in September 2012. Details of those allocations will be provided over the summer and finalised in the autumn. But that is not all. I am also aware that many of our existing school buildings across the country are in desperate need of repair. I am grateful to hon. Members from all parties who have shown me and my colleagues schools in their constituencies that desperately need investment. The energy and skill with which so many colleagues have lobbied underlines how effectively so many hon. Members across the House represent the most needy in their constituencies.

We have already made £1.4 billion available this year to deal with maintenance problems. Overall, we are spending more on school buildings in every year of this Parliament cumulatively than the previous Government spent in every year of their first two Parliaments. But I want to do more, which is why today I am launching a new privately financed school building programme to address the schools in the worst condition, wherever they are in the country. The programme will be open to local authorities and schools that had been due funding via BSF but, critically, it will also be open to those which, despite real problems, had never been promised BSF funding. I believe strongly that those in genuine need should receive the funding they deserve and that no part of the country should be favoured over any other. Individual schools and local authorities will all be able to apply, and I am launching the application process today. The scheme will be rigorously policed to ensure that we do not incur the excessive costs incurred by previous privately financed schemes. The programme should cover between 100 and 300 schools, with the first of these open in September 2014, and is expected to be worth about £2 billion in up-front construction costs.

Some of those local authority areas that had experienced the termination of their BSF projects asked for a judicial review of my Department’s decisions. In February, Mr Justice Holman found in favour of the Department on the substantive matters in dispute, but he found against me on procedural grounds and asked me to look again at the decision in six local authorities. He stressed that the decision to restore all, some or none of the projects was a matter for me. Over the past few months, Ministers and officials have listened carefully to the case made by the six local authorities and I am very grateful to them for the timely and constructive way in which they have presented their case. I have today written to those authorities to let them know that I am minded to indemnify them for contractual liabilities resulting from the stage their projects had reached but I am not minded to restore their specific BSF projects. They now have a further opportunity to make representations to me before I take a final decision.

I appreciate that the local authorities and their representatives will be disappointed, but let me also make it clear that this decision, if confirmed after any representations have been made, does not mean an end to new school buildings in their areas. These local authorities will all be eligible for support from the new programme that I am establishing to cater for population growth in the areas most in need and the new programme to cover the worst dilapidation. That is central to my reasoning on why I am minded not to restore their specific projects. I want to ensure absolute fairness in the distribution of the resources at my disposal. Because the previous Government chose to not to collect data on the condition of school buildings after 2005, I do not have the facts to judge how the needs of these schools compare with the needs of other schools around the country. The fairest thing that I believe I can do is to help to meet the costs which might arise from the stage these projects had reached and then to invite the affected schools to apply to the new school rebuilding programme and be assessed on an equal footing with everyone else, on the basis of need. Of course, should any of those local authorities have severe population pressures, they are likely to receive a portion of the £500 million fund that I have announced today.

I would now like to turn to schools revenue funding. The current system is of course extremely complex, opaque and often unfair. Most colleagues will have lived with the inconsistencies for years now, as similar schools in different parts of the country received widely differing and inequitable levels of funding, and the problem with the system we inherited was recently underlined by concerns expressed over academies funding. Under the system set up by the previous Government, academies received money in lieu of services that would previously have been provided by their local authority, but local authorities continued to receive the same funding as they would if they were still providing those services. That meant that local authorities were, relatively speaking, overfunded for duties they no longer discharged, so at the spending review we announced that from now on we would deduct money from local authorities to take account of the fact they no longer provided services to academies.

The huge success of the academies programme, with 803 open and more than 800 more in the pipeline, has meant that we need to reconsider the issue, and a number of local authorities have asked us to reconsider the amount of money deducted, so today I am publishing a consultation document for local authorities explaining the basis on which it is intended that the money will be deducted this year and next.

This area, however, is only one of those in which the funding system that we inherited is failing to meet the needs of the 21st century. Much wider reform is needed, so today we are also publishing a consultation proposing a fair and comprehensive reform of the way in which schools revenue funding is calculated overall. At present, similar schools in different areas can receive very different amounts of funding for their pupils. That is not fair on head teachers, teachers or pupils. That is why I am proposing a new, fairer national funding formula, with appropriate room for local discretion, in order to have a simpler, fairer and transparent system.

The problems with the current system run very deep, and we will not be able to solve them overnight. We want to consult and take everyone’s views so that we know how much change schools can cope with. We will not introduce change until we are confident in the new approach, and certainly not before 2013, and we will ensure that there are substantial transitional arrangements, but we are determined to start moving as soon as we can towards a system which ensures that all children are given the right level of funding to meet their needs. If that is taken together with our investment in 100 new teaching schools, announced last week, our investment of an additional £300 million in the early years, and an extra £2.5 billion in the pupil premium, I believe we can now begin to ensure that our schools are funded in a way that is modern, fair and just.

[Andy Burnham (Leigh) (Lab)]

I thank the Secretary of State for his statement and wish him the best of British in securing media coverage for it.

Let me begin on the subject of revenue. Across the House, we share a responsibility to ensure that the £35 billion budget for schools in England is spent as fairly as possible, giving every young person the best start in life, and I can assure the Secretary of State that we will work constructively with him to achieve that. The current system is not perfect, and the principles he has set out are a good basis on which to build, but the devil really is in the detail, and changes need to be considered very carefully.

With that in mind, may I welcome the Secretary of State’s conversion to the merits of consultation before imposing change that affects the lives of young people? Three times he has failed to consult and then been forced to change course under the threat of legal action: on Building Schools for the Future, on the education maintenance allowance, and on academy funding. Today, we have some grounds for hope that he has learned his lesson, with one major caveat. Is it not odd timing, to say the least, to start a 12-week consultation just as schools and colleges start the long break? Will the practical effect of that not be that it is a rushed six-week consultation that will coincide with the start of term, when people’s minds are elsewhere? Given that his announcement has far-reaching implications for every school in the land, and given that these changes are planned to come in only from September 2013, will the Secretary of State agree to a 12-week period of consultation from the start of the school year?

On a national funding formula for schools, the Secretary of State will know that that has been considered in the past and there is considerable scepticism about the ability to deliver it fairly. Does he accept that a rigid national funding formula could bring lots of winners and losers and remove local government’s ability to ensure fairness across an area? Will he commit to retaining as much flexibility as possible and will he ensure that any changes are carefully managed so that we do not see wild swings in school budgets?

As I have said, the changes will take effect from 2013-14, but we know that the Secretary of State was recently forced to agree to an interim review of academy funding. Will he update the House today on the progress of that review and how it will link to the consultation he has announced? Equally, can he assure the House that this review of funding will take account of responses to the special educational needs Green Paper, as parents of children with SEN will have concerns that giving more direct funding to schools will give them fewer guarantees over the funding available for their children?

The Secretary of State was silent today about 16-to-19 funding, which is perhaps not surprising, as it is the subject of a devastating report today from the Education Committee. Is it not the case that changes to post-16 funding, and reductions in funding to school sixth forms, could see some forced to close their doors? He has promised a review of post-16 funding. Would it not make sense to conduct this review concurrently with the consultation that he announced today?

The Secretary of State mentioned progress on academies. It is clear that we are moving at pace to a very different school system. An all-academy world where schools are directly contracted to London under a national funding formula will feel very different from the world we have known. It also raises the question of what happened to localism. Can he tell us what, if any, ongoing role he sees for local authorities in education? His consultation talks ominously about “chains of academies”. Can he tell us today how big he expects these chains to become, and whether he will place any limits on their expansion?

On capital, we will look carefully at the announcements that the right hon. Gentleman made today. Let me set out the context. At the spending review, the schools capital budget was left in tatters. His own officials briefed the Financial Times that the Secretary of State had folded too early in negotiations with the Treasury—possibly the understatement of the year. From that much-reduced budget he is funding his pet projects and giving them priority. There will be deep disappointment in the six local authorities that were forced to take legal action because he failed to consult them first. He says he has listened carefully to them. He made a promise to visit Sandwell, for instance, which I believe he has never carried out, so how can they have any confidence that he has properly looked at the condition of schools in Sandwell, and that this is not just a hollow exercise that has been ordered by a High Court judge?

The Secretary of State said today that he would meet the costs—that he would indemnify the six local authorities concerned. How much will he now have to pay to those schools? Is that not money that could otherwise have been properly spent on schools and children? It is a waste of public money in the current climate. How much money has he spent on legal costs since he became Secretary of State? He has never been out of the dock since taking on that job. We need to know how much money he has wasted.

In my constituency, the Secretary of State is funding free schools, having terminated the Building Schools for the Future programme. That has led to concerns that existing schools are trapped in crumbling buildings while the Secretary of State is funding one of his pet projects. It raises the question whether he can live up to the fairness and transparency about which he spoke today. Can he explain to the House how it is fair to fund the creation of surplus school places in cities such as Bristol, when he is failing to fund basic need in primary schools up and down the country? Is that not ideological rather than fair? With a much reduced budget, should he not be prioritising basic need? And can he tell us what is transparent about a free school programme where cheques are handed out around the country, but parliamentary questions from Members on all sides about the costs of that programme go unanswered?

The statement comes on a day when the Conservative-chaired Education Committee has delivered a devastating end-of-term report on the Secretary of State’s conduct. The education world has learned through bitter experience to be extremely wary of his announcements on funding. As ever, we will be watching closely to see whether the reality matches his rhetoric.

[Michael Gove]

I thank the right hon. Gentleman for the broadly constructive tone of his response. He asked a series of detailed questions, which I shall do my best to reply to in the time available.

On the timing of the consultation, plans to move towards a national funding formula were outlined in the education White Paper, “The Importance of Teaching”, which was published last autumn. There has been extensive engagement on the ground with local authorities and school leaders, not least through the task and finish group of the ministerial advisory group on local government finance. This consultation is a step towards ensuring that we can move in the right direction, but judging by the response that we have today, I know that there are many people who are impatient for us to proceed. We will make sure that in the consultation there is, as the right hon. Gentleman requests, appropriate room for local authorities to stress the importance of flexibility.

In the consultation documents, which are available in the Vote Office now for all Members, we emphasise that there are a range of options, and it is clear that we want to ensure that there is appropriate local flexibility—not just room for local authorities to allocate resources to those schools most in need, but greater transparency, for example, over the operation of schools forums. I hope the right hon. Gentleman and his colleagues will engage constructively in making sure that those decisions on the ground can properly balance school autonomy with local accountability.

The right hon. Gentleman asked about the interim review on academies and LACSEG—the local authority central spend equivalent grant. We are specifically consulting today in a way which can ensure that local authorities are funded fairly, and that we do not have the double funding that has arisen under the complex funding system that we inherited. As a result of that consultation, I hope we can provide a reassurance to all students in all schools.

The right hon. Gentleman asked about special educational needs. In the consultation overall on schools funding, we make it clear that high needs pupils are a specific priority. There will be a block of funding in the overall dedicated schools grant which is for them and which will be disbursed at local authority level. The central role of the local authority in protecting vulnerable pupils will be protected, and I am sure he will want to work with us in ensuring that that is successfully implemented.

On 16-to-19 funding, it is critical that we ensure that we align any reforms with the Wolf review, which the right hon. Gentleman so warmly welcomed just a few months ago. Wolf argued that we need to ensure that when we reform the funding of 16-to-19 education, we do not recreate the perverse incentives in the old system of 16-to-19 funding, so we aim to align that reform with the broader reforms to improve vocational education.

The right hon. Gentleman asked about progress on academies. Like him, I am delighted that so many schools have now become academies. He asked about the sustainable level of growth of chains. I believe that chains such as the Harris group, Ark or the United Learning Trust are doing an amazing job on the ground, working with local authorities and turning round schools in the worst condition. As far as I am concerned, they should grow at the fastest sustainable rate. That is why we are making the reforms that we can. Our aim always is to help those children most in need, and those academy chains have helped those children most in need.

On negotiations at the spending review, I am proud of the fact that at the spending review we were able to secure the best revenue settlement for any domestic Department, apart from the Department of Health. I am proud of the fact that as well as guaranteeing fat cash payments for all schools for the rest of the spending review period, we secured additional money for the early years and for the pupil premium. I am particularly proud that we have since then ensured that on our capital budget, we have driven forward efficiency. The James review and the associated steps that we have taken have meant that we have liberated an extra £500 million for basic need.

The right hon. Gentleman asked if I would listen carefully to representatives from Sandwell and other local authorities. I shall. I appreciate the particular concerns in every local authority, but the vital thing is that we need to be fair to all local authorities. There are local authorities represented across the House that were not in the BSF scheme and have not had their case heard, and we need to ensure that they receive the funding that they deserve.

Finally, the right hon. Gentleman asked me about basic need and the importance of prioritising it. We are spending 62.5% more on basic need than the previous Government. They were specifically warned in February 2010 that local authorities were saying that basic need funding was far from adequate, and they were invited to undertake an urgent nationwide review. No action was taken. The lead member for children’s services in the London borough of Newham, the Labour councillor Quintin Peppiatt, said:

“We gave warning for the last five years through various deputations that this was a real problem, and I have to say it was not taken with the seriousness that it should have been. At last, serious action is being taken and not a moment too soon.”

--- Later in debate ---

[Michael Gove]

I am grateful to the hon. Lady for making those points, but we must agree to differ on EMA. I think that the new learner support fund that we are introducing with the discretionary capacity that local colleges and schools will have to support students will effectively meet needs. On university technical colleges, I do not believe that they are an experiment; they are on the ground and working well already. I was pleased to read a speech by the right hon. Member for Leigh (Andy Burnham) only last week in which he reflected on his visit to a university technical college that JCB helped to establish.

[Andy Burnham]

A Labour academy.

[Michael Gove]

In that speech, the right hon. Gentleman paid tribute to the success of the Conservative donor, Sir Anthony Bamford, in helping to establish that school. I, too, should like to pay tribute to Sir Anthony Bamford, who is a great man. May I underline the fact that that is a cross-party initiative? Lords Baker and Adonis are heroes and their work deserves to be supported.