HC Deb 17 July 2003 vol 409 cc454-72 1.15 pm
Mr. Charles Clarke

Mr. Speaker, with permission I would like to make a statement about the funding of schools in the years 2004–05 and 2005–06.

I begin with an assessment of the changes that have taken place in the past six years. Our country now has the best results at ages 11, 14, 16 and 18. We have tackled the shameful neglect of our school buildings and, by 2005–06, we will be investing over £5 billion in repairs and new buildings. We have delivered major increases in school spending, and school funding is up by more than 25 per cent. in real terms per pupil. It is no secret where the money has gone. We now have 25,000 more teachers and 80,000 more support staff than in 1997. Moreover, teachers' pay has improved significantly. For example, in 1997, a teacher with six years' experience received £20,040, while their counterpart today will, from September, receive £26,460, which is a real-terms increase of 13 per cent. We have also started down the road to a fundamental improvement in teachers' work load and working arrangements. Those are all achievements of which teachers, heads, governors, local and central Government can be proud.

There is no doubt, however, that many schools have experienced real difficulties this year with their budget allocations. As I set out in my oral evidence to the Select Committee on Education and Skills earlier this week, a wide range of factors contributed to that situation. I will not repeat them here, but I wish to put on record my appreciation for the hard work of head teachers and local education authorities across the country in coping with those difficulties and continuing to improve the quality of education provided by their schools.

In my statement on 15 May, I said that I would keep the House informed of my thinking, and give head teachers and LEAs early indications of our approach to help them begin planning for next year. My purpose today is to outline the first steps that we are taking to respond to schools' practical concerns about the present system. Following continuing consultation with representatives of local authorities, chief education officers and head teachers, I will make a further report to the House in the autumn. My guiding principles on the changes needed in the schools funding system for the next two years are as follows. First, every school should receive at least a guaranteed per pupil increase in funding for each year. Secondly, central and local government should make earlier announcements of the financial allocations to schools so that heads have greater certainty and time to plan. Thirdly, we should provide greater stability through a two-year settlement on teachers' pay, ring-fenced grants and the guaranteed per pupil increase in school funding. Fourthly, there should be greater transparency in the overall system of funding for schools. Finally, the reforms agreed with the key work force partners, as reflected in the national agreement on raising standards and tackling work load, should be sustained.

The Government have been working intensively to identify a package of measures that will deliver those aims. This year, my Department provided a guaranteed minimum increase in the education formula allocations for each local education authority. In 2004–05 and 2005–06, I intend to go a stage further. My central proposal for each of these two years is to provide a guarantee at the level of the individual school, so every school will receive at least a minimum increase in its funding per pupil. Of course, many schools will receive more than this minimum. We intend to implement that through fair funding regulations, placing each local education authority under a direct obligation to provide for such a minimum guarantee. I will confirm the minimum percentage increases for 2004–05 and, provisionally, for 2005–06, by the time of the provisional local government finance settlement in November, when we have completed our analysis of costs in the system, in particular, on teachers' pay. We will share that analysis, and the rationale for the level of the minimum percentage increase, with our education partners.

This guarantee will provide for a minimum funding increase in every school. That minimum will be based on the average cost pressures for 2004–05 and 2005–06. Obviously, it cannot match the precise composition of each school's current spending profile. For example, it cannot insulate schools from the effects of changes in their pupil numbers, or reflect their wide range of different staffing arrangements. Heads and governors will continue to need to plan ahead, with their LEAs, to take account of those features that are specific to every school, but I believe that our average per pupil guarantee will give schools a far more stable foundation.

We are already discussing with our education partners how the guarantee will work in detail, and we will consult further. We will seek to agree guidelines to underpin the operation of these new arrangements, in order, for instance, to take proper account of the extra protection that LEAs already provide to very small schools. Within this framework, LEAs, heads and governors will work together through their schools forums to agree the funding baseline to which the guaranteed per pupil increase will be applied.

For sixth forms, the Learning and Skills Council will, in both the 2004–05 and 2005–06 school years, provide each school with guaranteed minimum increases in funding equivalent to the per pupil guarantee for schools. The LSC will consult all heads of maintained schools with sixth forms in the autumn on its plans for improving the operation of sixth form funding for 2004–05.

Some schools have found it necessary this year to spend from their reserves or from devolved formula capital allocations; others have set deficit budgets by agreement with their LEAs. Of course, schools and LEAs have the primary responsibility to manage the ongoing consequences of such decisions, including maintaining sound financial management and balancing budgets. The changes that I am introducing for 2004–05 and 2005–06 will help them to do so. However, I recognise that there may be some cases where doing so could be beyond the capacity of individual schools and LEAs. In those few cases, I will be prepared to consider limited, transitional support to avoid damage to children's education, where that is part of a locally agreed recovery plan between the LEA, schools and the Department. I shall discuss with head teachers and local authority representatives how best to provide such support.

Of course, the minimum guarantee that I am offering today to schools can be fulfilled only by ensuring that each LEA has the necessary resources within its schools budget. There are two key elements. First, in both 2004–05 and 2005–06, I will set the minimum increase for schools formula spending share—SFSS—in each authority at a level that will cover the school level guarantee and provide the headroom necessary to enable the local fair funding formula to work, and to help provide transitional support to individual schools, where necessary. Secondly, we will ensure that the local authority receives sufficient central Government grant to passport in full the increase in SFSS into its schools budget.

The Government will also provide additional resources for other local services, including children's social services, which are now my responsibility, over and above those announced for them in the last spending review. That will help to ensure that the arrangements I am announcing today do not create difficulties for other local services. The details will be announced in the autumn. Having provided these resources, the Government are determined that each and every school should benefit in the way intended.

My right hon. Friend the Deputy Prime Minister and I will write to every local education authority setting out the Government's clear expectation that, barring wholly exceptional circumstances, each and every LEA should passport the full increase in its SFSS into a matching increase in the schools budget. That is essential if heads, governors, teachers and parents are to have full confidence that the resources intended for schools will indeed get through to schools. I have statutory powers to require LEAs to set a minimum schools budget, and I will be prepared to use those powers where it is necessary to do so.

This year most LEAs' spending on centrally funded pupil services, such as special educational needs and excluded pupils, has increased significantly faster than their spending on budgets delegated to individual schools. It is essential that, in future, the individual schools budget receive its fair share of any increase, so my intention is that, in 2004–05 and 2005–06, spending on such central items should rise no faster than spending on the individual schools budget. I will consult on how fair funding regulations can ensure that this is delivered. In doing so, I will take account of the need for local flexibility on items such as the expansion of nursery provision to meet the Government's commitments.

It is clear that a significant source of problems for some schools this year has been the changes in the standards fund. I will help to provide stability and security by maintaining and inflation-proofing the support that the standards fund provides to schools at its 2003–04 levels. That means that I am reversing the reductions previously announced for standards fund support to schools in 2004–05 and 2005–06. That will provide more than £400 million in each of the next two years, over and above existing plans. I will also be making earlier announcements on standards fund distribution, before the announcement of the provisional local government finance settlement.

I am able to make such additional funding available from my end year flexibility, and other redirection of existing resources. I set out for the House in my Department's annual report the planned and prudent use of accumulated end year flexibility over the next three years to supplement resources secured through the spending review. This additional commitment means that my accumulated end year flexibility is now fully committed to support children, young people and adults in achieving their full potential.

Head teachers should know their budgets in good time for the beginning of the financial year. I am taking a number of steps to provide earlier notification of their funding. As well as earlier notification on the standards fund, the Government will bring forward the date of the provisional local government settlement to the middle of November. We also intend to bring forward the date by which local authorities are obliged to notify me of their passporting intentions by one month to the end of December, and the Government will propose an appropriate amendment to the Local Government Bill on Third Reading in another place.

It is vital that the reforms that we agreed with key work force partners, as reflected in our national agreement on raising standards and tackling work load, are sustainable. That remains a key priority for my Department. By maintaining the standards fund at its current level, we will help to ensure that schools receive the core funding that they need to make progress on implementing the work force agreement.

On 11 July, I submitted my evidence to the School Teachers Review Body. That evidence makes the case for a two-and-a-half-year settlement on the basis of current targets for inflation. I have set out a clear strategy to enable sensible progression along the upper pay scale while controlling the costs, and I have asked the STRB to report on all the major issues in early November, so that LEAs and schools will have much earlier certainty about the level of pay cost pressures for the next two years.

This year's problems have underlined the need to provide more and better support for schools and LEAs in planning and managing resources, and for schools forums, which have a key role to play in helping to secure local consensus on distribution. We will be discussing with education partners, the National College for School Leadership and others how best we can make rapid progress.

Finally, I want to make it clear that this package is designed to secure stability and restore confidence in our funding arrangements for schools. We need to ensure that the schools funding system commands broad support, works to promote our overall objectives for raising standards in education, and so ensures that resources are used in the most effective way to secure higher quality and better levels of achievement in schools. I will, of course, be monitoring the impact of the changes I am announcing today, with a view to considering whether further changes are needed for 2005–06. It is critical to ensure that funding arrangements for schools are sustainable in the long term.

I recognise that this has been a difficult year. However, I believe that the steps I have outlined today provide a realistic framework of stability and certainty for the next two years. We will work with LEAs and schools, within the framework I have set out today, to deliver the further improvements our children deserve. I commend this statement to the House.

Mr. Damian Green (Ashford)

I am, as always, grateful to the Secretary of State for giving me advance sight of his statement.

The crisis that has caused the Secretary of State to come to the House with this statement has been both unnecessary and hugely damaging to our schools. Twelve months ago, his predecessor presented the Government's plans for education spending as a triumph. Six months ago, it was obvious to heads, teachers and parents across the country that the reality was cuts, redundancies and disappointment. For those six months, the Government have turned all their energy on a hunt not for a solution, but for a scapegoat. They tried blaming local authorities and they have even tried blaming heads for paying teachers too much.

The ludicrous nature of that attempt to shift the blame from the Department, where it belongs, has finally been revealed today, when we learn that the Secretary of State's Department underspent by £846 million last year. So hundreds of teachers are being made redundant while his Department is sitting on the money that could have kept them in work. He referred charmingly to his accumulated end-year flexibility. Can he explain what is more urgent in his budget than stopping teachers being made redundant?

The statement contains some detailed proposals that improve the current system. Bringing forward the date on which the School Teachers Review Body reports and the local government settlement so that schools' budgets may be set earlier will be helpful. But quite apart from the point about whether that is an adequate response to the crisis, there are key questions about the Government's own behaviour. One important point that the Secretary of State has made this morning is that he is recentralising, after last year's short flirtation with trusting local government. More of the pot of money will come from his Department in future, but does he not recognise that it is often his own Department that is the cause of the delays? Some schools do not know what money they will receive from the standards fund until well after they have set their budgets. He has tried to reassure them today. Can he give the House a guarantee that individual schools will know the amount of centrally distributed money that they are to receive before they have to set their budgets?

Even more importantly, what will the Secretary of State do about the Government's besetting sin—trying to do the jobs of heads and governors for them? He will know the widespread view in our schools that the standards fund money is too often an excuse to tie schools up in a web of bidding and form filling to meet the needs of the latest ministerial initiative rather than of our children's education. If more money is coming directly from the Department, what does he propose to do about that micro-management?

The most obvious gap in the statement is the absence of any hard numbers. Today, schools are going into deficit, cutting their capital budgets and sacking teachers. They want to know what their position will be next year. Nothing that the Secretary of State has said clears that up. He has promised what he called a minimum funding increase guarantee for schools next year. But this year, according to the comprehensive spending review, there was a real terms increase of 3.4 per cent., and yet we have had the crisis. So is he promising more than 3.4 per cent. next year? Is he also promising that the increase will meet all the extra costs that Government impose on schools? Will it meet the added costs for schools that have gone into deficit this year or that have spent their capital budget on revenue spending? If it does not do so, we will be back here next year with a repeat crisis.

Will the Secretary of State also clear up what he means by an increase in funding? Funding sounds like it means a grant from central to local government to pay for schools. However, as he knows, in the arcane and rarefied world of local government finance, it can also mean the schools formula spending share, which is simply a theoretical estimate of what each council should spend. If all he is going to do is announce a big figure for that estimate that is not accompanied by the money from his Department, which is what he did to many LEAs this year, he will provoke a repeat crisis, with cuts in schools and a sterile argument between central and local government about whose fault it is. His words in this area were carefully opaque. Can he clear up the question whether the grant will meet not only the increase in the SFFS that he mentioned, but the backlog that so many LEAs have faced and has caused the crisis this year?

The statement also appears to threaten the provision of spending on children with special educational needs and on the rescue services for pupils who have been excluded. I really cannot believe that he means to restrict spending specifically in those areas, where the most vulnerable children will be worst affected. Can he confirm what he appeared to suggest—that he intends to take powers to himself to stop local authorities spending too much on children with special needs?

The Government will not be forgiven by parents and teachers for failing to cope with this year's funding crisis. This statement is designed to prevent another crisis next year. What the Secretary of State has to offer is greater predictability. Of course, predictability is good in itself, but if we discover in the autumn that schools are able to look two years ahead and simply predict more misery, cuts and redundancies, this year's level of anger will be multiplied, and this Government will go down as the Government who betrayed our schools.

Mr. Clarke

I have to say that there was very little substance in those remarks. Let us get the facts clear. First, I am announcing today more money for schools throughout Britain in both 2004–05 and 2005–06. Secondly, I am absolutely clear that we need to ensure that the money that is allocated to local education authorities for schools is spent on them, so that money gets there in the right way. Thirdly, I am absolutely clear and I have announced today that the increase in expenditure between individual schools and central budgets should be balanced so that schools themselves get the resources that they need in an effective way.

I am also clear from what the hon. Gentleman said that there is no commitment of any description from the Opposition to any level of funding increase whatever. Indeed, judging by the rhetoric of his party in the past, its commitment is to reduce funding on schools, and I think that we should take that into account in considering what it has to say.

The hon. Gentleman asked me about numbers. It would indeed be foolhardy to offer numbers to schools when we do not know the level of the teachers' pay settlement, which forms such a substantial amount of any expenditure. That is why the commitment that I give is to make that announcement when we know the teachers' pay settlement following the proper review that has been set up. I think that that is an entirely correct approach. There is new money for schools in this approach in order precisely to give the confidence and stability that the system needs.

I acknowledge—this is the one point that I acknowledge from what the hon. Gentleman said—that my Department needs to improve its practice on the allocation of standards fund information in good time. That is why I said that we would provide that information much earlier in the year than traditionally so that both schools and local education authorities can know better where they are. We are not interested in micro-managing schools' budgets. What we are interested in doing is ensuring that schools have enough money to take the decisions that they have to take to enhance education opportunities for themselves.

I am proud of the announcement that we are making today. I think that it can offer the stability that is needed and that everybody will observe what has been said by the hon. Gentleman and notice the enormous hole at the centre of what the Conservative party has to say.

Mr. Barry Sheerman (Huddersfield)

May I give my right hon. Friend's statement a cautious welcome? It seems to address the major points of concern that we in the Select Committee on Education and Skills were putting to him only this week, so I give it a guarded and cautious welcome. It is a complex statement and we will want to go away and pore over it in some detail. There was an element of concern as he touched on special educational needs and pupil referral units, and on whether schools will be able to decide how much they spend on those matters.

Overall, I give the statement a cautious welcome. My right hon. Friend seems to have hit the three main targets. Let us make sure that the Government are really on target when we consider the statement a little more closely.

Mr. Clarke

I am very grateful for my hon. Friend's remarks. As he says, this is a complex matter, and that is why I appreciate the detailed study that his Select Committee has made of this issue. I look forward to hearing any comments that he wishes to make once he has had the chance to have a considered look at the detail of the statement, but I appreciate the remarks that he has made at this stage.

Mr. Phil Willis (Harrogate and Knaresborough)

I thank the Secretary of State for the advance copy of his statement, but he ought to be ashamed of the cowardly way in which he sneaked it out on the very day that schools go into recess for the summer, when they can do absolutely nothing about it.

To date, the Secretary of State and his Ministers have arrogantly tried to blame everyone for this crisis but themselves. He told us in April that local authorities had stuffed £500 million down the backs of their sofas. He said in the Select Committee on Education and Skills that head teachers were incompetent for not managing their budgets. His latest excuse was that teachers are being paid too much. When the hon. Member for Ashford (Mr. Green) and I were at the National Association of Schoolmasters Union of Women Teachers' conference in April, we were told that we were scaremongering, and that that was why schools did not get the budgets that they need.

Today, we heard not a single word of humility from the Secretary of State about the chaos that has been caused. He was not able to name a single local education authority that has not satisfied his Department about its allocation or passporting of money to schools. At the Local Government Association conference in July, Barnaby Shaw, the Department's school improvement and excellence manager, said: When you try to analyse what went wrong, the fault lies with the DfES. That is one of the Secretary of State's senior officials. Does he agree with him? Does he agree with the Deputy Prime Minister, who, at the same conference, accused him of exacerbating the situation with ill-thought-out statements?

Today's statement is also ill thought out. Will the Secretary of State confirm that not a single teacher or classroom assistant who is made redundant today will be re-employed as a result of it? Will he confirm that no additional resources will be given to schools with deficit budgets that have used all their balances or devolved their capital unless they are part of the recovery plan? Will he confirm that the recovery plan is in fact a loan that schools will have to pay back? Will he agree that when he appeared before the Select Committee on Monday, he let the cat out of the bag by saying that schools with insufficient resources will not be able to implement the work load agreement within the relevant time scale?

We welcome some aspects of the statement, including the longer-term settlement, the prospect of a two-year pay deal, and guaranteed per-student increases; but that is what the Secretary of State promised for this year. What additional resources has he obtained from the Chancellor in support of the next two-year settlement? If he has no more money, this is a hollow promise. If he has a sealed envelope, money must come from somewhere else to pay for the real increases that he has guaranteed. Who will be the new losers in this settlement? What plans has he actively to model the proposals at a school level? To be fair to the Secretary of State, we are pleased that he is going to bring forward the School Teachers Review Body process and that local authorities will have all the information before them. His ministerial colleagues refused to do that during the passage of the School Standards Bill, even though we proposed amendments that would achieve it. Does the Secretary of State accept that this year's transfer of standards fund money was in reality a sleight of hand by which he removed £350 million? That had a severe impact, especially on newly qualified teachers.

Finally, will the Secretary of State abandon the ludicrous idea of individually funding 25,000 schools? As we have seen this year, he is not competent to run his own Department, let alone 25,000 schools. When he lounges on the beach somewhere in Europe this summer, he may be reminded of the hundreds of teachers and classroom assistants who are being made redundant and will have to find jobs elsewhere.

Mr. Clarke

Perhaps I could visit the hon. Gentleman in Harrogate this summer and lounge on the beach while I consider what to do. On the other hand, I might find that people come up and shout at me, having been inspired by the hon. Gentleman.

I am delighted by hon. Gentleman's warm welcome for the substance of our proposals, particularly on the two-year deal, the standards fund and the extra resources. It is a shame, however, that he had to hide it under a great shower of rhetoric that did not add up to much.

I have acknowledged throughout, and continue to do so, that mistakes were made in relation to the shared responsibility of my Department and local government for funding schools. I have said that in this House and in the Select Committee, and I have sought to analyse why and how it happened. It is precisely because we need to rectify those mistakes that I am making this statement. It is important that schools are well managed—that is why recovery plans to deal with deficit budgets and suchlike are necessary. It is not the case that a tap of money is turned on and schools spend, spend, spend. The situation has to be well managed and well directed, and that is what we will do. We are modelling the proposals in detail; I was at pains to point out the various consultations that I intend to have with local government, head teachers and others.

On the hon. Gentleman's remarks about the funding formula, it is not necessary to withdraw a proposal that I never made.

Joan Ruddock (Lewisham, Deptford)

I welcome my right hon. Friend's statement, which contains much to encourage us. I particularly thank him for the additional money for children's social services, as we had been greatly concerned that that might be badly affected by his ring-fencing. Can he clarify how the baselines will be established? Many schools are adopting deficit budgets, and unless they get back to where they should have been, an increase for 2004–05 will not be sufficient and may lead to redundancies, which we have managed to stave off for the moment.

Mr. Clarke

I am grateful for my hon. Friend's general support. Having discussed the situation with many of her colleagues in the London borough of Lewisham, I am well aware of the pressures that her local schools have experienced. I want to make two points in response. First, I have been told by many schools, governors and local education authorities that the single most important thing to sort out at this stage is certainty about the future and stability. That is what I sought to offer in the statement.

Secondly, I acknowledge what my hon. Friend says—we have discussed it outside this Chamber—about schools that have spent from reserves or from devolved formula capital, or where deficit budgets have been set. I also acknowledge that in some cases resolving those issues could be beyond the capacity of individual schools and LEAs. In those few cases, I will be prepared to consider limited transitional support to avoid damage to children's education and consequences such as those that my hon. Friend describes. However, that must be part of a locally agreed recovery plan. The local authority—in her case, Lewisham—and schools must discuss among themselves, then agree with us, a plan that will deal with such problems. That is the responsible approach, and it allows stability for the future.

Mr. Andrew Turner (Isle of Wight)

The Secretary of State is welcome to come to the Isle of Wight to lounge on the beaches, where he might meet the 40 or so staff who have lost their jobs as a result of this year's schools funding crisis. He said in his statement: "LEAs, heads and governors will work together through their schools forums to agree the funding baseline to which the guaranteed per pupil increase will be applied." Does that mean that this year's increase might be based not on the actual funding, but on a lower figure?

Mr. Clarke

That depends entirely on pupil numbers and the overall situation. I accept that, as my hon. Friend the Member for Lewisham, Deptford (Joan Ruddock) said, there are issues involving deficit budgets. We will take those into account in the way that I set out.

Mr. Peter Mandelson (Hartlepool)

In warmly welcoming my right hon. Friend's statement, I suggest that he needs not only to ensure that there is a stable and predictable funding system in future, but to provide ample flexibility for individual schools to experiment with new teaching methods and innovative use of resources on their premises. In that context, I commend to him the online learning system that is being pioneered by Manor college of technology in Hartlepool. The point is that without greater freedom and flexibility being permitted for individual schools, such innovative teaching advances are likely to remain restricted in the future.

Mr. Clarke

I entirely agree with my right hon. Friend, which is why I so energetically rebut the suggestion from the Opposition Front-Bench spokesman that I am interested in micro-managing schools. The truth is exactly as my right hon. Friend says: not only Manor college in his constituency but a large number of schools in the country are behaving in an innovatory way in an entirely outstanding application, for example, of information and communications technology, with different partnerships outside the school, which is all focused on raising educational standards. That can be done only if there is freedom and flexibility at the school level. That is what this statement is designed to offer.

Mr. Peter Luff (Mid-Worcestershire)

As many Worcestershire schools have welcomed the increased capital money made available by the Government to local schools, I am sure that they will welcome aspects of today's statement. They will be concerned, however, that the Government have brought forward no proposals at all to address the growing gap between Worcestershire's funding and the English national funding average, despite teachers being paid on a national pay scale. When will the Government address the iniquity of schools in similar situations in similar local education authorities getting wildly different sums of money, which is forcing counties such as Worcestershire to charge their council tax payers considerably more than the Government think that they need to?

Mr. Clarke

I, too, represent a shire county in which the kind of issues that the hon. Gentleman raises are real. We have asked the School Teachers Review Body this year to look at whether there is a case for regional variations and so on, which is part of my remit letter that I published last Friday. To be blunt, the key area in which that is so important is London and the south-east, where there is already a whole system of extra pay to deal with those circumstances. It is a bigger factor there than in some other parts of the country, including Worcestershire. It is important to make an assessment, however, for the reasons that he states.

Glenda Jackson (Hampstead and Highgate)

Could my right hon. Friend help me by giving a little more detail about how the budgets for the following years will be defined? Despite my local authority, Camden, passporting all Government money to our schools, and despite finding an additional £1.8 million from other budgets for education, it is still facing a shortfall of £1.5 million. That is resulting in a loss of teachers and classroom assistants, deficit budgets, of which there have been 14 to date, and capital projects are being lost as well as certain educational programmes. Will he help me by saying what will be the minimum budget, given that there can be no argument that Camden has always passported, and will continue to passport, all Government money, and has always found additional funds for education?

Mr. Clarke

I join my hon. Friend in paying tribute to Camden council, which has had substantial discussions with my officials and schools within the borough to address the problems there. As she knows, Camden is relatively well funded, being the seventh highest-funded education authority in Britain, but it has had serious issues that it has been seeking to address in a constructive way. For the reasons that I gave earlier, I am not prepared to put a figure on the amount of money that we are talking about until we know the pay review body settlement in particular, because that will be important. One of the issues this year was that the pay review body recommended, and I then agreed, a significantly greater pay increase in inner London, in boroughs such as Camden, than across the country, for the reasons that were referred to in the question from the hon. Member for Mid-Worcestershire (Mr. Luff). I agreed that but it put greater pressures on the budgets of schools in inner London. That is why I am not prepared to give a figure for next year until we know exactly what the situation will be on teachers' pay.

Sir Sydney Chapman (Chipping Barnet)

Whatever the merits of the right hon. Gentleman's statement this afternoon, he seems not to have addressed the real crisis that exists at the moment. That can be no better explained than by looking at what happened in Barnet, where the Government, through the revenue support grant, gave an additional £8.1 million to cover all services, but required the LEA to pass on £14.5 million to the schools, which the local education authority has done, causing a huge hike in the council tax. He has admitted that there have been failures, and that problems exist, and Barnet brought in an independent consultant who totally vindicated the LEA. Will he look at how, this year, he can immediately redress the injustice and help Barnet to cover this deepening crisis?

Mr. Clarke

As the hon. Gentleman knows, his parliamentary colleagues representing Barnet have been extremely energetic in making precisely the case that he sets out. I and my colleagues have been ready to meet colleagues from Barnet to discuss the situation, and continue to be ready to discuss it in every way that is appropriate. I remain of the view that the security and certainty that I am offering in this statement is a major means to resolving the issues of funding in the current year, including in schools in Barnet. That is why I commend my proposals to the schools and local education authority in Barnet, as well as more widely.

Bob Russell (Colchester)

Does the Secretary of State recall his visit last month to Colchester when, as the Evening Gazette graphically reported, large sums of money were pledged? In particular, will he give a guarantee today that those schools that draw a large number of children from the Army estates will receive additional funding for the turbulence factor, which he led all those head teachers whom he met to believe would be forthcoming? Given his statement today, will he guarantee that the money for state schools that cater for service children will be provided?

Mr. Clarke

As the hon. Gentleman knows, I had a constructive meeting with the heads of the schools around the Army base in Colchester to discuss precisely the issues that he describes. In short, the problem is that when garrisons move, and therefore families move, that can cause instability in the numbers in a particular school. This statement does not address that point because it is not about pupil numbers. The commitment that I gave to those head teachers—I give him the assurance that I continue to give—is that we are addressing the 250 schools altogether in the country that have that problem as garrisons move around, and we are discussing with the Ministry of Defence and others how we can give such schools the kind of stability that they seek.

Mr. Jim Cousins (Newcastle upon Tyne, Central)

I straightforwardly welcome my right hon. Friend's statement. He is absolutely right that there is too much brokerage as the money finds its way to schools. He is also right that the single most important cause of the difficulties that schools face is the cut in the standards fund, which was itself suggested by local government. He is right to reverse that, and I congratulate him on charming £400 million extra out of Prudence to support the reintroduction of the standards fund. Will he ensure, however, that the recovery plans, the changes in local formulae for distributing money to schools and the future distribution of the standards fund are all properly consulted on locally in good time, so that everyone can see exactly what is going on and that there is fairness not favours?

Mr. Clarke

I am grateful for my hon. Friend's warm remarks, and I can give him the assurance that he seeks that the result of this will be to give clarity to every school about what the funding regime is. One of the relatively few silver linings that emerged from the grey cloud of funding this year was a much closer relationship in most parts of the country between the local education authority and the schools within that area, and a more serious debate about where resources were really being allocated. I believe that my statement today will accelerate that process.

Mr. David Amess (Southend, West)

On average, in Southend, secondary schools have faced a funding shortage of £400,000 and primary schools of £50,000. In the light of the Secretary of State's statement today, will his officials kindly liaise urgently with officials in Southend to see whether the redundancy notices that were planned should not be sent out, preferably before the meeting with the Minister for School Standards on 9 September?

Mr. Clarke

I am happy to confirm that my officials would be very happy to meet the officials of the local education authority to discuss those points.

Mr. Andy Reed (Loughborough)

I thank the Secretary of State for his statement and for the useful meeting that Leicestershire MPs had with him earlier this week. Will he use the flexibility that is possible in what he said today to address the situation that was mentioned earlier by the hon. Member for Mid-Worcestershire (Mr. Luff), which is the gap in funding between the best and worst funded local education authorities. I know that he was able to allow some flexibility this year, with an additional £835,000 for the county when a shortfall was highlighted. Will he use that in his talks with the Office of the Deputy Prime Minister to look again at the area cost adjustment to help reduce the enormous gap that has opened up? I very much welcome the other steps that he is taking in today's statement.

Mr. Clarke

I am very grateful to my hon. Friend for those remarks. We had a very useful discussion with him and his colleagues from Leicestershire earlier this week, and I can confirm that I and my colleagues in the Office of the Deputy Prime Minister will continue to discuss these matters.

Mr. David Bendel (Newbury)

The Secretary of State said in an earlier answer that mistakes had been made. When we have a fiasco like this before us on the Public Accounts Committee, Members from all parties often put to the permanent secretary the question that I would now like to put to the Secretary of State. How many Ministers or civil servants have lost their jobs as a result of this fiasco?

Mr. Clarke

None, and I do not intend that any should.

Tony Lloyd (Manchester, Central)

I congratulate my right hon. Friend on his openness at this early stage; we are now giving some clarity to the schools system. I remind him that the importance of the standards fund—as I know he recognises—was that it precisely targeted the most disadvantaged pupils in the most disadvantaged communities, and that it undid some of the great damage done by the previous Conservative Government. Will he make it clear how far we are able to tell such schools that next year they will have budgets that allow them to operate in the same way as last year?

Mr. Clarke

I think that we can be sure that schools can operate in that way. In so saying, I pay tribute to my hon. Friend for the work that he has done with schools in central Manchester to improve the situation there. It was the evidence that he and his colleagues brought to me about the impact of the reductions in the standards fund on some of his schools, in the most challenging circumstances, that convinced me that the course of action that I am announcing today—to reverse the proposed cuts in the standards fund—is necessary to give the kind of assurance that he seeks.

Dr. Julian Lewis (New Forest, East)

Six long years after the Prime Minister promised to make education his top three priorities, can the Secretary of State look you in the eye and tell the House that that promise has been fulfilled—or even, Mr. Speaker, look you in the eye and tell the House that that promise has been fulfilled?

Mr. Clarke

Yes I can, Mr. Speaker, for the reasons that I have set out in the statement in terms of increased resources, teachers, classroom assistants and teachers' pay, and of better results and outcomes. The contrast with the Conservative years of the past could not be greater.

Dr. Brian Iddon (Bolton, South-East)

I note that my right hon. Friend's statement refers to increased funding for sixth formers in sixth forms attached to maintained schools. I do not have such a sixth form in my constituency, but I have a sixth-form college. Will my right hon. Friend assure the House that the differential funding between pupils in sixth-form colleges and those to which I have already referred will be levelled out as soon as possible?

Mr. Clarke

It is true that the essence of this statement has been about the funding of schools, rather than of colleges, whether sixth-form colleges, tertiary colleges or general further education colleges. I can confirm, however, that it is the Government's intention directly to reduce the gaps in funding that exist between schools and colleges when educating sixth formers. That remains one of our priorities.

Mr. David Tredinnick (Bosworth)

I thank the Secretary of State for receiving a cross-party delegation of Members from Leicestershire on Tuesday to discuss the worst crisis that we have ever had in education in the county. Is it not a fact that 40 to 50 per cent. of our schools now run deficit budgets, and that the Secretary of State is directly responsible for that? Will he tell the House whether the limited transitional resources to which he has referred will be applied to Leicestershire in the short term? Although he says that he is not going to micro-manage schools' budgets, is it not a fact that he is thinking of directing LEAs on how and where they should spend the money in their budgets?

Mr. Clarke

The principal direction that I am offering is that there should be a minimum increase per pupil for every school. I think that most people in the House will welcome that direction and say that it offers the kind of stability that it would have been good to have had in the past. On the hon. Gentleman's more general point, I think that people sometimes have very short memories. In his own constituency in Leicestershire, there are now more teachers, better-paid teachers, better results, and more classroom assistants. The Government whom he supported did nothing for those people.

Mr. Tony McWalter (Hemel Hempstead)

My right hon. Friend will be aware, following my meeting with the Minister for Children, my hon. Friend the Member for Barking (Margaret Hodge), that Hemel Hempstead is facing particular problems at the moment because of the huge cut in courses available at the local further education college. Schools in the area will need a considerable increase in their facilities to compensate for this. Will my right hon. Friend give me the assurance that, when schools face pressures of this kind, his funding arrangements will be adequate?

Mr. Clarke

I can give my hon. Friend that assurance. In fact, one of the specific mandates of the learning and skills councils is to address the relationship in 16-plus education between schools, sixth-form colleges, general colleges and so on, in a way that will address the issue that my hon. Friend has raised.

Mrs. Annette L. Brooke (Mid-Dorset and North Poole)

Assuming that LEAs passport funds as required, how will today's proposals help schools in the lowest-funded authorities such as Poole and Dorset? Guaranteed percentage increases on a low base will not be enough to stave off crises in the future.

Mr. Clarke

There will be enough to achieve a guaranteed per pupil increase for every school in Poole. I know that there have been problems in Poole, and a delegation has met my right hon. Friend the Minister for School Standards to discuss them. The decisions that I have been able to announce today on the standards fund will assist schools in Poole and also in other parts of the country.

Mr. David Chaytor (Bury, North)

I welcome my right hon. Friend's statement. I remind him that schools in my constituency and in many other metropolitan districts in the north of England suffered deficit budgets, year on year, for every year of the old Tory funding formula. Is it not the case that the introduction of a floor for the increase in spending for each individual school will impact on the pace at which the floors and ceilings for each local authority's spending can be phased out? Will my right hon. Friend tell the House how long it will now take to phase out those floors and ceilings?

Mr. Clarke

I cannot give my hon. Friend that information until we have the figures later in the year. I can, however, confirm that his central point is correct. That is why I have worked so hard to ensure that I could make this statement today on the extra money for the standards fund, so that there would not be such an impact on the floors and ceilings as there would otherwise have been, thus ensuring that schools in his constituency and others will be able to benefit to the greatest possible extent. I shall, however, give him the detailed answer that he wants when we publish the figures based on the School Teachers Review Body report.

Mr. Mark Francois (Rayleigh)

The Secretary of State will be aware that this year Essex had the toughest grant settlement of any county in England. Bearing that in mind, this seems to be a complex statement, and 1 suspect that the devil will probably be in the detail. Will the right hon. Gentleman give the House an assurance that whatever guarantees he is offering will be fully funded by central Government, so that no unfair burden is placed on local council tax payers to finance them?

Mr. Clarke

I can give that assurance. I have visited Essex, as the hon. Member for Colchester (Bob Russell) said, on a couple of occasions. My journey from Norwich to London takes me through Essex, and, rather than just looking from a distance, I prefer to engage with the populace and to discuss these things with them. The impact of the funding formula was variable across schools, and some schools in Essex did very well out of it. My candid advice to the Conservative county council and its leader, who sits in the other place, is to make less political capital out of this issue and to focus more closely on the specific situation in the schools.

Roger Casale (Wimbledon)

Thanks to the excellent work of teachers and head teachers in my constituency, many of those parents who are fortunate enough to be able to choose are now entrusting the education of their children to state schools rather than paying to have them educated privately. If we are to continue to accommodate and encourage this increase in demand, should we not allow the oversubscribed schools such as the Hollymount and Wimbledon Chase primary schools to expand? Should we not also ensure that schools such as Pelham and Dundonald primary schools and Raynes Park high school are no longer faced with the kind of budgetary pressures that they have faced this year? Will my right hon. Friend undertake to work with me, the schools and the local authority to tackle these problems and to get to the bottom of why they have arisen, so that we can ensure that the improvements that are being made can be built on in the coming years?

Mr. Clarke

I give those assurances, and will add to them. The Under-Secretary, my hon. Friend the Member for Enfield, Southgate (Mr. Twigg), is working hard through the London Challenge precisely to deal with the problem of over-subscribed schools and to get more flexibility in these areas. That is being done for the reasons that my hon. Friend the Member for Wimbledon (Roger Casale) states, and we will continue that work.

Mr. Richard Bacon (South Norfolk)

During the Secretary of State's sojourn from the Palace of Westminster to Norwich, South, he passes through my constituency, and we were pleased to see him engaging with the populace at Loddon just the other day. Does he accept that teachers and classroom assistants in my constituency and elsewhere in Norfolk are losing their jobs? Does he also accept that it is just possible that the very complexity of the educational finance system may be part of the problem? Will he at least consider a pilot in which the money available from the state that is spent on education is given directly to parents to spend as they choose?

Mr. Clarke

I agree with the hon. Gentleman from my neighbouring constituency that the system is complex and difficult, and that it is necessary to get more clarity into it. I am not prepared to contemplate a pilot such as he described at the moment, but I suggest that he talks to his political colleagues on Norfolk county council to see whether they would consider such a step in his constituency.

Mr. Michael Jabez Foster (Hastings and Rye)

I welcome my right hon. Friend's statement, today in particular, because it helps us for the summer and perhaps messes up the Liberal Democrats' summer campaign. That apart, will he define what he means by sufficient central Government grant for next year? My authority had a £14 million passport figure, but only a £10 million increase this year. Does it mean that any passported sum will be fully funded?

Mr. Clarke

The short answer to that question is yes, but we will deal with the context and quantums later this year. I acknowledge that Brighton and Hove council has had to address a number of difficulties, and my lion. Friend has raised those with me. We will endeavour to deal with them in those circumstances.

Mr. Andrew Lansley (South Cambridgeshire)

On the Secretary of State's stately progress from Norfolk to London, perhaps he would like to stop and visit schools in my constituency, which are running deficit budgets because they want to retain teachers, not make them redundant. He talks about a guaranteed per pupil increase for next year. Does he accept that for those schools the key concern is that it reflects not only the unavoidable additional costs in 2004–05 compared with 2003–04, but meets some of the unavoidable costs that arose in this financial year that were not covered in the settlement available to Cambridgeshire? Although Cambridgeshire passported 113 per cent. of its increase in formula, it did not make up the disparity that many schools experienced.

Mr. Clarke

In answer to previous questions, I have dealt in some detail with precisely the point that the hon. Gentleman raises, and I do not have anything further to add. If I am invited to visit his constituency, of course I will be delighted to do so.

Ms Oona King (Bethnal Green and Bow)

I apologise for being a few minutes late for my right hon. Friend's statement, but I was receiving a petition from the Tower Hamlets parents association signed by hundreds of residents. Like me, they are desperately concerned about the £5.5 million funding shortfall for education in Tower Hamlets. I thank the Secretary of State for seeing my hon. Friend the Member for Poplar and Canning Town (Jim Fitzpatrick) and me about this problem. I particularly welcome his announcements on standards funds. What assurance can he give parents, teachers, governors and local government that schools that set a deficit budget as a result of the reduction in standards funds last year—not this year, but the 2003–04 financial year—and the increase in teachers' pay will get the additional funding they need to prevent redundancies and to set a balanced budget?

Mr. Clarke

I am aware of the issues in my hon. Friend's constituency, and I am grateful for her acknowledgement that we had a useful meeting to discuss these questions. I do not think that there is anything I can add on deficit budgets for this year, but I shall certainly take her remarks fully into account.

Mr. Mark Hoban (Fareham)

Last year, Hampshire county council received one of the lowest settlements of any local education authority, and that has contributed to some of the funding problems in local schools. Will the Secretary of State confirm that the relative shift in funding will continue next year? If so, does he recognise that that will put more pressure on local schools?

Mr. Clarke

I think that I have clarified exactly what the Government propose to do for Hampshire schools and those elsewhere in the country. Like others who have contributed to this discussion, I am a Member of Parliament for a shire county, and I acknowledge that serious issues need to be addressed. My statement offers stability to create conditions in which they can be addressed.

David Taylor (North-West Leicestershire)

As I mentioned to the Secretary of State when he carefully and courteously received a cross-party delegation of Leicestershire MPs on Tuesday, the 50 schools in northwest Leicestershire have had a difficult time as a result of this settlement, not least because of the impact of standards fund changes. Will he reassure the House that the extra £400 million per year that he is injecting into that mechanism starting next year will not be top sliced from some other educational pot, and is new money? Does he agree that the corollary to the national distribution formula reflecting economic and social need should be that the distribution mechanism within LEAs reflects the needs of individual school catchment areas?

Mr. Clarke

I can give the assurance that the extra resources that I have announced today will be targeted on the specific needs of schools. We have made that announcement to create the stability that we are seeking.

Mr. Nick Gibb (Bognor Regis and Littlehampton)

The statement is welcome, particularly the average per pupil guarantee and the Secretary of State's decision to reverse next year's reductions in the school standards fund. I am also grateful to the Minister for School Standards for meeting a delegation of heads from Bognor Regis to discuss their funding problems. It seems that this year's problems arose from the complexity of the funding arrangements. Will the Secretary of State model these changes and the funding for each authority, as suggested by the director of education in West Sussex, so that we can be absolutely sure that this year's problems will not recur next year?

Mr. Clarke

The reason I sought Mr. Speaker's permission to make a statement today was to set out the structure and architecture of the arrangements that we will carry through. I shall announce the money when we know the result of the teachers pay review body and other matters. We will use the time between now and then to work with LEAs and schools to model the detailed impact of the changes, so that when we come to make the money announcement in the autumn it reflects the real situation and is properly prepared.

Geraint Davies (Croydon, Central)

I warmly welcome my right hon. Friend's statement. He will know that an extra 549 teachers and teaching assistants have been appointed in Croydon since 1997, but this year we face particular difficulties. Will the transitional funding applied in exceptional circumstances for deficit funding come from his Department or from the Office of the Deputy Prime Minister? How confident is he in his dialogue with the Deputy Prime Minister that enough money will be available to fund the forecasts for next year, alongside provision for other vital services, without a large increase in council tax? Will the money also fund people with special educational needs, so that they have the services that they deserve?

Mr. Clarke

I have had good discussions with the Deputy Prime Minister and with other Departments about the best way of achieving the funding. We have reached agreement, which is why I am able to make this announcement.

Dr. John Pugh (Southport)

What discussions has the Secretary of State had with the Treasury prior to this announcement about bypassing local authorities and funding schools from his own Department, and what was the upshot of those discussions?

Mr. Clarke

There have been substantial discussions between Ministers and officials in my Department with the Treasury. I explained the upshot of those discussions in my statement.