School Funding

HC Deb 29 April 2003 vol 404 cc1-24WH

Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Sutcliffe.]

9.30 am

Mr. Deputy Speaker

I welcome Members to this first sitting of Westminster Hall following the somewhat shortened but none the less very enjoyable Easter recess. I hope that all colleagues are duly refreshed.

Mr. Paul Goodman (Wycombe)

Thank you, Mr. Deputy Speaker, for welcoming us so warmly to this debate on school funding, which it is a great privilege to have secured.

I begin by paying tribute to the hard work of the many heads, teachers and governors whom I have been fortunate enough to meet in the past two years during my continuing effort to visit every primary and secondary school in the Wycombe constituency before this Parliament ends. I pay special tribute and give my warm thanks to all the teachers in my constituency who not only teach difficult and sometimes disruptive pupils but act as social workers or, in some cases, parents. They socialise and, in the real sense of the word, civilise children who may live in homes where rules are arbitrary or non-existent and who lack the care, support and love in childhood that many of us have been lucky enough to take for granted.

Turning directly to school funding, I want to begin by reading a letter recently sent to all parents by a school's chairman of governors. It says: The Government has changed the way it allocates block grants to councils and has moved money from the south-east to the north. We believe the Government has not thought through the implications of all changes for some of the neediest schools. We will have to cut our spending on resources dramatically. This means no new books or computers. In effect, we will only be able to buy the most basic of resources such as pencils and paper. We do not want to make anyone redundant but that may come. In any event, as staff leave we will not be able to replace them. Although we will do our best to maintain standards, we cannot guarantee that the quality of education will not suffer. It is our most needy children who stand to lose the most. Those are the words of Fiona Millar, the chairman of governors at Gospel Oak primary school of Camden in London, and they sum up perfectly what is not just a funding problem for Gospel Oak primary school in particular, but a funding crisis for schools in general, to which I shall turn more fully in a moment.

First, however, I should tell the Minister that if he wants to track down Ms Millar to discuss with her in person the problems of Gospel Oak primary school, I can help him to locate her during school hours. As we learned from the papers, some of which printed her letter yesterday, Ms Millar's working address is none other than 10 Downing street, London, SW1. She works as personal assistant to the wife of the Prime Minister, who may be able to pass on Ms Millar's views directly to the Minister, or even to higher authorities within the Government.

In High Wycombe, we know how Fiona Millar in Camden feels. Like constituencies represented by some of my hon. Friends in the Chamber this morning, Buckinghamshire is sometimes thought of as green, leafy and prosperous in its entirety. However, the background against which some schools in my constituency are set is somewhat different. The national indices of deprivation show that Marsh and Micklefield ward in my constituency stands at 2, 659 in the table of 8,000 wards, and Oakridge and Tinkers Wood at 2,178. Oakridge and Tinkers Wood is therefore just outside the top 2,000 wards for deprivation. Booker and Castlefield ward stands at 1,669, and at 886 for education. It therefore falls within the 1,000 most deprived wards for education. That illustrates the fact that, as hon. Members will know, there remain serious pockets of social exclusion, deprivation and poverty in areas that are generally thought of as prosperous.

Marion Clayton, the cabinet member for schools on Buckinghamshire county council, said of the current schools funding crisis: Schools are faced with the real possibility of having to make teaching staff redundant—ironic when it is so difficult"— my hon. Friends will appreciate the significance of the next few words— to recruit teachers in the south-east—and I suspect many schools will be setting deficit budgets with no real hope of recovery in the short-term. Buckinghamshire is not alone: apparently other authorities are worse affected. David Hart, the general secretary of the National Association of Head Teachers, says that 70 redundancy notices have already been issued in Essex. My hon. Friend the Member for Rayleigh (Mr. Francois) may have more to say about that.

Mr. Mark Francois (Rayleigh)

I will.

Mr. Goodman

I am sure that the Minister will listen with interest to my hon. Friend's remarks. Redundancy notices are also likely to be issued in Devon, Gloucestershire, Bournemouth, Poole, Torbay, Plymouth and Barnet. Nick Butt, the head of St. Edmund's primary school in King's Lynn, Norfolk, which is near, if not in, the constituency of the Secretary of State for Education and Skills, is leaving his post in protest.

How has all that happened when the Government boast, for example, of a 6.2 per cent. increase in grant in Buckinghamshire, which, as I am sure the Minister will point out, is well above the rate of inflation? How has that happened when the Government also boast of passporting money for education directly to schools?

I shall answer those questions with a response from David Shakespeare, the leader of Buckinghamshire county council, to a letter from the Under-Secretary of State, Office of the Deputy Prime Minister, the hon. Member for Shipley (Mr. Leslie). Mr. Shakespeare writes: Buckinghamshire's 6.2 per cent. increase in grant that is quoted in your letter is indeed a well above inflation increase. However, the Government's own assessment of our Council's spending requirement (FSS) in order to cover inflation, new responsibilities placed on the County by Government and demographic changes is an 8.3 per cent. increase, not 6. 2 per cent. As three-fifths of the Council's income comes from Government grants which, as you state, have only increased by 6.2 per cent., the remaining two-fifths contributed by the council tax payer has to increase by over 11 per cent. for the overall spending increase to be the 8.3 per cent. specified by the Government (FSS). This is simple arithmetic. Your officials further need to understand that the resource equalisation factor incorporated in the Government's new grant distribution has taken away £11.2 million of grant from Buckinghamshire, which automatically adds a 7.5 per cent. increase to the council tax to replace this loss. That is the shift of Whitehall money from south to north or, more specifically, from efficient, mainly Conservative-controlled authorities in the south to inefficient, mainly Labour-controlled authorities in the north, to which Ms Millar referred in her letter.

Mr. Shakespeare continues:

The remainder of Buckinghamshire's council tax increase consists firstly of a further 1.5 per cent. to be able to comply with the Government's new FSS spending target for schools and the new 88/12 budget split between classrooms and support services. Secondly, a further 1.4 per cent. increase in council tax to fund the action plan required of us by the Government's social services inspectorate. The story of Government funding not matching Government requirements is as true when applied specifically to schools as it is when applied to local government in general.

Marion Clayton points out that although there has been a 6 per cent. increase for education in general, that increase is "not sufficient" to cover assimilation arrangements for teachers, employers' national insurance increases and the loss of standards funds money in Buckinghamshire.

I shall now give some national figures. The Local Government Association, was not, when I last looked, an outpost of Conservative central office. The LGA says that the formula spending share for education does not allow for the following pressures…The teachers' employers' superannuation increase—£50 million. National insurance contributions increase—£115 million. Teachers pay increase—£548 million. Other inflation—£200 million. Withdrawal of Standards Funds Grants—£335 million. There may be disagreement between the Government and the Conservative-run Buckinghamshire county council, between the Government and the non-Conservative run LGA, and between the Government and the decidedly non-Conservative Fiona Millar about how much money local authorities and local schools should be receiving, but surely there should be no dispute between anyone about how much money local schools are actually receiving? However, there is. At the annual conference of the Association of Teachers and Lecturers, the Minister for School Standards, whom we are all delighted to see here today, said: About half the LEAs have more than £2 million still to be allocated to individual schools and some have over £10 million. If that trend is repeated across all LEAs, we are talking in the order of £500 million still to be allocated to schools. However, as the LGA points out: Local authorities, in aggregate, are passporting the full increase in provision to schools in 2003/4, even where it is not backed up by grant…Local authorities are planning to continue to spend above the Government's provision for schools by approximately £100 million in 2003/4. This clearly demonstrates local government's continuing commitment to education, even though this has resulted in large increases in council tax in many areas…For the ten years between 1993/4 and 2003/4, local authorities have provided £4.3 billion above government education provision…In 2003/4, 130 out of 148 authorities will passport in full. In addition, as Marion Clayton points out: I can assure Charles Clarke that Bucks certainly has not held anything back—the purse is empty. I stand back for a moment from the figures, claims, and counterclaims about money to ask a simple question: why have relations between the Government, who, when they stood for election in 1997, said, "Education, education, education", and schools deteriorated to such an extent that we now read in The Times Educational Supplement that the Secretary of State for Education and Skills told chief education officers that their request for money just floods over my head and I don't listen to what you say, quite frankly"? Why did even Doug McAvoy of the National Union of Teachers, who was not especially close to Ministers when the Conservative party was in government, describe the relationship between the Government and the NUT as worse than anything that happened through the Thatcher years"? Above all, how did a woman such as Fiona Millar, who has been deeply committed to the New Labour project since its inception, as has the Minister, and could scarcely be closer to the Prime Minister, come to write a letter so critical of Government education policy—a letter that, as an experienced journalist, she would have expected to find its way into the national press?

The answer does not lie in Education Ministers' lack of good intentions, nor in the way in which Ministers have robbed largely efficient Conservative councils in the south to fund inefficient Labour councils in the north. Nor does it lie in the Chancellor's national insurance hike, damaging to business and schools though it is. I believe, as I am sure my hon. Friend the Member for Altrincham and Sale, West (Mr. Brady) will argue, that it lies not in what Ministers spend but, as Ms Millar indicated, in how they spend. The schools funding crisis is intimately linked to the Government's regime of ever-increasing command and control of schools from the centre and of bewildering new funding streams and new bodies that many believe are remote and unaccountable.

Finally, I give two examples from my own constituency. The first relates to learning and skills councils. In the past month, it is striking that I have received two complaints from heads of local secondary schools about the local learning and skills council, which both heads claim has in effect reneged on agreements about funding into which it had entered. I do not intend to take a view on either of those complaints today, or on where the rights and wrongs lie, but I believe that they express some of the frustration that schools feel in dealing with bodies that they sometimes seem to regard as bureaucratic and unresponsive.

The second example relates to the time and standards initiative on school governors. I recently received a letter from Catherine Hinds, chair of the Buckinghamshire Association of School Governors, about the initiative, stating that the association has grave concerns about the attitudes and lack of trust exhibited by Ministers in school governors shown in its handling…We are concerned that our national representative body, the National Governors Council, has been refused a place in the discussion about reforming the school workforce. Further, we feel that it is an oversight that there will be no governor representatives on the new Implementation Review Unit (IRU) nor on the monitoring group. Both will impact on the work of governing bodies and yet will have no voice. We feel that at a time of Government commitment to partnership working, the exclusion of governors sends out an unfortunate message. I shall be interested in the Minister's response to the matter when he replies to the debate.

In those two examples of grievances raised by heads and governors in my constituency, the approach to education and schools is characterised by an excess of centralisation and a lack of consultation. It has left schools with 20 pages of paperwork for each school day of the year and is failing some of the most vulnerable children in my constituency and in the constituencies of hon. Members of all parties present in the debate.

9.46 am

Mr. Mark Francois (Rayleigh)

I congratulate my hon. Friend the Member for Wycombe (Mr. Goodman) on securing this important debate and on introducing the subject so ably.

I am pleased to have been called to speak on a subject that I confess I feel strongly about: the effect on school funding in Essex of the Government's new formula spending share, or FSS system, which replaced the standard spending assessment, or SSA system, for determining central Government grants to local authorities from April 2003.

Under the Government's new FSS grant formula, Essex county council received the worst grant settlement of any English county—under 3.7 per cent. That is particularly important for county councils as provision of education accounts for a large proportion of everything that they do. Thus grant changes have a major knock-on effect on schools within their areas. In Essex, the situation is arguably worse than almost anywhere else in the country, as the rise in the education element of the FSS settlement outweighs the formula grant that they are receiving to pay for it. That leads to a funding gap, which in the case of Essex represents over £7 million.

Although 3.7 per cent. sounds initially like a small real-terms increase, it is nothing of the kind when seen in the context of all the increased costs that schools will have to bear this year, some of which have been mentioned by my hon. Friend. Those additional costs include, first, the 1 per cent. increase in national insurance contributions on staff pay, which obviously affect the school's salary budget; secondly, increased pay scales, including performance-related pay, which is necessary to aid retention of key staff as recruitment and retention of teachers has been a problem in the home counties, including Essex, for several years; thirdly, higher contributions by employers towards teachers' pensions—the Government actuary estimated that the employer's contribution should increase from about 8 per cent. to about 13 per cent. from April 2003; and fourthly, increasing insurance costs for both building and personnel, which fall on schools too.

The matter has been highlighted in the Essex press. For example, the Evening Echo ran a major article about the subject on 7 April entitled "Why our schools face a financial crisis" with a large photograph of the Secretary of State for Education and Skills.

Mr. John Horam (Orpington)

I am grateful to my hon. Friend for giving way as he was delighted to have an opportunity to deliver his speech, which has been maturing like wine for some time. Does not the list of things that he mentions as the reality of what faces schools show how surprising it is that the Secretary of State expressed shock and surprise when those factors came out? That shows clearly how out of touch the Government are with the reality of teaching and with what is going on elsewhere in Government.

Mr. Francois

I agree. For a number of months before the new system came into operation in April, those in local government and those involved in the teaching profession warned the Government of the likely consequences. It is untrue to say that the Government were not given notice. They were told ad nauseam what was likely to happen, but now Education Ministers feign surprise when the effects become apparent, which does them no credit.

The article entitled "Why our schools face a financial crisis" describes the situation as follows: Schools are facing financial meltdown because the Government hasn't done its sums properly. That's the view of embattled headteachers across south Essex. Many are facing a shortfall of hundreds of thousands of pounds for the coming year—a deficit which could increase class sizes, end building projects and even lead to redundancies. Astonishingly, the crisis has been brought on by a Government attempt to make school funding fairer. A number of Essex schools must resort to quite drastic measures as a result of the changes. Many have put a virtual halt on development work and seek to reallocate money where possible to cover increased staff costs. A number of Essex schools, including several in my constituency, have thrown in their final reserves to try to balance their budgets for this year and avoid compulsory redundancies. However, by definition, that tactic cannot be repeated next year.

By March 2003, David Hart, the general secretary of the National Association of Head Teachers, had reported that 70 redundancy notices had already gone out in Essex, as my hon. Friend the Member for Wycombe cited. There could well be more as schools run out of money during this financial year. Later in March, the Minister for School Standards, who is with us this morning, announced an extra £28 million in funding to help to alleviate the situation, but only a fraction of that money will come to Essex, because it is being spread across a number of local education authorities. There is some small relief, but it in no way matches the scale of the problem. Another important point is that, as Ministers have not yet made definitive announcements on year two of the new system, no one can plan ahead with certainty. People have no idea exactly how much money they will have in 2004–05.

Many schools in Essex must struggle through this year, not knowing whether the outlook next year will be the same or even worse as the new system well and truly kicks in. Before the Minister attempts to argue that that is the fault of Essex county council because it has not passported through sufficient funding to its schools, I remind him that Essex has one of the best records of passporting money through to schools. I looked at the figures for a couple of years ago, when I think that we had the second highest proportion passed through of any county council in England after Lincolnshire. Whatever flannel the Minister attempts to give us about money being held back at county hall, the cabinet member for education on Essex county council, Councillor Iris Pummell, has repeatedly stated that Essex passports through everything that it can and that the basic problem is that the money from central Government is not enough.

As we in Essex understand, the net effect of the changes in the grant formula for allocations to local authorities has been to transfer resources away from authorities in London and the home counties to assist the Government's friends in the north—even if that has not assisted the Government's very close friends in Downing street. If the Government believe that local authorities in the midlands and the north of England need more resources, fair enough, but I do not see why council tax payers in Essex should be asked to foot the bill. Even with a county council tax increase of 16 per cent. this year, it has not been possible to make up for the funding gap in education in Essex.

The supreme irony in all of that is that Labour came to power in 1997 repeating the mantra "Education, education, education". It claimed to put it at the heart of everything that it stood for. That now rings particularly hollow in Essex where head teachers and governors have been left with extremely hard choices as a result of Government policy towards the county. Unless Ministers alter the arrangements for next year, the consequences for schools, teachers and pupils in Essex could be truly awful. Finally, there are five Labour Members in Essex and not one of them is here this morning to defend the Government's policy. That speaks volumes about their attitude to the way that the Government have treated our county.

9.55 am

Mr. John Randall (Uxbridge)

I start by congratulating my hon. Friend the Member for Wycombe (Mr. Goodman) on initiating this important debate on school funding. Like my hon. Friend the Member for Rayleigh (Mr. Francois), although I try not to be quite as beastly as him, I am a little disappointed that no Labour or even Liberal Democrat Back Benchers are present. I would not like to say why that it is. Perhaps they have not got funding problems in their schools, or perhaps they are pounding the pavements desperately trying to find someone who might vote for them.

Let us not dwell on that because I want to talk about the London borough of Hillingdon. Like many constituencies represented by my hon. Friends and by Labour Members, we have a crisis in our schools. Many face a budget deficit. I came to the House from a business background. I understand budgets, although I am not sure that some Labour Members understand how money works. Budgets have to be balanced and if there is insufficient money one has to look at various ways to make them balance. One can cut overheads. The schools to which I have spoken have cut their overheads to the bone.

The only option in many schools is to look at reducing staff costs, in other words to reduce staffing numbers. As we all know, that is probably one of the major expenses of any business. Any of us who really care about education would consider that to be one of the worst options. Parents will find it difficult to understand why teacher numbers are going down when council taxes are rising horrifically. It is difficult for them to understand when the Government say that they are putting more and more money in. The statistics can show what is going in, but we do not see what is coming out. That is one of the problems.

I believe that the Department has genuinely miscalculated. I do not subscribe to the view of some of my hon. Friends that the Government could possibly be so cynical as to try to put resources elsewhere. After all, this blessed Government have been put on earth to give benefit to all in this country. Any thought of something like that is close to blasphemy. I must warn my hon. Friends that that sort of talk will lead them into perdition. The Government are a bit worried about this. They are asking around to try to find out what is happening. The Department has approached the London borough of Hillingdon for details about numbers of schools likely to incur a deficit or to reduce their staffing levels. I congratulate them. Having created the mess, they are trying to sort it out. I hope they succeed.

Mr. Horam

One of the difficulties is not merely the Government's approach, but the complexity of the situation. The Minister will know if this is correct, but as I understand it there are 66 different funding streams for secondary schools, despite the Government's recent reforms. That is a recipe for chaos.

Mr. Randall

My hon. Friend is absolutely right. What is going on is down to what one might call in layman's terms the cock-up theory. The Government do not understand exactly what is going on. That is why I do not think that the problem is caused by a malevolence of intent.

I am a little bit saddened when I hear the Secretary of State saying that the Government have given all the funding and the problem is all the fault of rotten local education authorities. I cannot speak for other local authorities, but I think that many of them are passporting the money on. One of the Minister's colleagues visited Hillingdon recently, and that borough has been doing an excellent job for several years in passporting the money through. The leader of the authority, Ray Puddifoot, had been working extremely hard to do just that—it has been one of his principle aims since he became leader. We have an excellent director of education, Mr. Philip O'Hear, who has also made that a priority. The Minister acknowledges the excellence of that gentleman, which may show that he is not a placeman of Conservative or Liberal Democrat Members. He is doing an excellent job.

What is causing the problem? We know that the funding has to go towards the increased teachers' pay award, national insurance changes, teachers' pension increases and pupil number changes. The standards fund has ceased and other grants have just stopped, and schools have to try to find money from other places. Some other factors have been highlighted such as the cost of collapsing the nine-point teachers' pay scale to a six-point scale. In September 2002, that meant that a range of teachers leapfrogged a couple of incremental points, adding to the salary bill. The full-year effect of that is that there is no new financial year. Performance-related pay arrangements for teachers have largely been funded by Government grants until now, but the second stage will require a 40 per cent. contribution from each school. That will cost roughly £400 per teacher per annum.

Another problem that affects London and the south-east, to which my hon. Friend the Member for Rayleigh referred, concerns recruitment and retention. That is another subject for another day, except to say that one of the ways that anyone in business—I am afraid to say that these days schools have that element to them—has to retain people is to offer them incentives, such as a higher pay scale, a better salary and so on. That has to come out of the budget, so it is a real problem.

I know that other hon. Members want to catch your eye, Mr. Deputy Speaker, so I do not want to speak for too long. The Government have to take the matter seriously, because people from schools are coming to me and my colleagues in the borough saying that they have a serious problem that will affect the education of children. I do not think that Ministers sit around wondering what they can do to Hillingdon today to make life awkward. By and large, they are a pretty fine bunch of people. They are sometimes misguided in their political views but they do try quite hard. They have not, however, got the full picture.

I have to say that a bit of complacency has crept in. I am not going over the top because I want to get the most for my borough, and I recognise that if one starts attacking the Government they sometimes return that attack. I am prepared to be as nice and toady-like as necessary in order to ensure that my constituents and their children get what they deserve.

10.4 am

Andrew Selous (South-West Bedfordshire)

I intend to concentrate my remarks on what is happening in my local education authority of Bedfordshire. The director of education recently informed me that 21 teaching and teaching assistant posts are under threat. Section 188 notices have been sent. Ten of them are in my constituency of South-West Bedfordshire, and four schools are affected. However, I am particularly worried by conversations that I have had about schools other than the four about which I have been formally notified. They face very challenging budgetary situations and are able to continue employing some of their teachers and teaching assistants only because of reserves that they have built up in previous years, which will not be in place next year.

I intend to deal in detail with the financial situation of one particular lower school. I shall not name it, because it would not be proper to do so. I was fortunate to receive a detailed briefing from the school governor who prepares the budget. Bedfordshire operates a three-tier system of lower, middle and upper schools, so a lower school would equate to a primary school in most other constituencies. The governor told me that the school faces a 14 per cent. increase in the cost of employing all its teachers, including the head teacher. However, the combined income from the LEA and the Government has increased by less than 1 per cent.

School funding is horrendously complicated, as other hon. Members have said. The school's basic income, which comprises only 70 per cent. of its total budget, has gone up by a respectable 6.4 per cent. That is a credit to the Bedfordshire LEA. Its financial settlement increase from the Government for education was only 3.13 per cent; it was later increased with a further grant to bring it up to 3.2 per cent. The LEA, which passports money to schools and has a good record of putting additional money into schools, was able to raise the increase to 6.4 per cent.

However, the school will be £30,000 short because of the deficit in its budget. In effect, that is one teacher. The governor likened the situation to an extended death sentence over the school. It will be able to fund that teacher out of reserves that it has prudently built up, despite receiving some criticism in the past, but it will not be able to build the new classroom that it planned to build. It will be able to keep the teacher in place for one more year, but what will happen after that? My worry is that the situation next year will be even more serious for many such schools.

Is that an isolated case? Does that school face a unique combination of circumstances that result in a particularly difficult budget? Apparently not—the head teacher told the governor that all her colleagues in the district face the same problems. Bedfordshire received the 118th worst settlement of all 150 LEAs. As I said, it received only a 3.13 per cent. increase. My constituents will feel aggrieved when they compare that with the 8.96 per cent. increase that Hartlepool received. All our children have needs, and that considerable disparity is not fair.

The Secretary of State for Education and Skills tells us that it is all the fault of the LEAs, which are holding money back from schools. I confirm what other hon. Members have said. In fact, my local authority is rather like a postbox at the moment. The money comes in and goes directly out to schools. The local authority does that willingly, because it knows that it is the right thing to do. It has a good record historically and at present on passing money on to schools.

A further detail relating to the school on which I am concentrating worries me. I have heard from the head of financial policy at the county council that there is some money from the standards fund for items such as the national grid for learning which the council hopes to be able to pass on to schools. The council says that it intends to do that, probably before the end of May. When I heard that from the county council, I thought, "I need to check this out very carefully. Perhaps the Secretary of State has a point. " I phoned the governor who had briefed me carefully about his school and raised the matter with him. He said categorically that as far as the standards fund items, including the national grid for learning, for his school were concerned the budget was already nil. The school had nearly £4,000 for that last year; it gets nothing for this year. Indeed, the school's standards fund money is down by some £10,300 overall. That worries me greatly. The Secretary of State and some officials within LEAs appear to think that money will be coming to schools, but the school I am talking about has had it confirmed that that will not be the case as far as it is concerned.

I will quote briefly from a paragraph in a letter written to me recently by the headmistress of another lower school in my constituency: The school did not receive the budget until 4th March". Frankly, I do not find that acceptable. We have to remember that in many schools budgets are the work of governors, who are volunteers. They do such work at the end of long working days, at weekends and when they have looked after their families and all their personal administration. The school did not get the budget until 4 March, which was too late to make any redundancies to balance the figures. By reducing the hours of some staff, not replacing an Assistant who retires in July and the Headteacher increasing her teaching commitment we are still approx £15,000 short of balancing the budget. What general lessons can we draw from the situation to remedy the problems facing so many of our schools? I will make a number of suggestions. We must reduce the complexity of schools funding. The governor responsible for finances at the school about which I have been speaking tells me that there are changes every year. It is difficult to draw up budgets when they change every year. It is extremely difficult for people to get their heads round the numbers and the different budgetary streams.

Let us increase the basic income—what most of us call the core funding for schools. I understand that it is around 70 per cent. There should be a target to raise that figure much higher. Let us push it up to 80, 90 or 95 per cent. Schools would know what they were going to get and, at the start of the year, they could set a proper budget. They would know that their staff were secure and would not waste time bidding for bits of money here and there, which ties up a tremendous amount of teacher time. There is an opportunity cost to the schools in question. Heads, teachers and governors could be doing other, more constructive things in schools if they were not bidding for small amounts of money that they may or may not get and were able to produce proper budgets at the start of the year.

Finally, it is important that the Government seriously consider raising their revenue in ways that do not add costs and cause more complications for schools and other public services. It is the mark of a Government who are a little naïve and inexperienced in running large organisations, whether in business or the public sector, that the shocks—the tax and revenue-raising methods that they have brought in—have caused many complications in schools by adding to the costs of national insurance, pension contributions and so on. Perhaps we need a little more honesty in terms of raising Government revenue in ways that do not impact directly on the costs to our schools.

10.14 am

Mr. David Rendel (Newbury)

I begin by congratulating the hon. Member for Wycombe (Mr. Goodman) on securing this debate on the first Tuesday after the Easter Adjournment and on his extraordinary prescience in choosing school funding as his subject in advance of the clamour that has arisen about the subject following the Easter conferences of the teachers' trade unions. As we seem to have rather more time towards the end of the debate than I expected, may I add that school funding is not provided entirely by the Government—

Andrew Selous

Does the hon. Gentleman agree that he has more time than he anticipated because of the complete absence of Labour Back Benchers wishing to participate in this debate?

Mr. Rendel

I forbore to say why Labour Back Benchers may not be present in the Chamber today, but it is reasonable to suppose that many of them have local elections in their constituencies and may believe that their duties lie in their constituencies today.

Mr. Francois

Like London.

Mr. Rendel

I am sure that many London Members wanted to be present and I see one or two here.

An interesting aspect of school funding that has not been mentioned is that it does not all come from the Government. Some funding comes from parents who choose to pay for their children's schooling and it may be worth mentioning to those who may not have seen it that an interesting article about independent schools in The Independent, which may have appeared in other newspapers, points out that around one in five failed their Ofsted inspections this year and a number of them are, worryingly, said to take on teachers without putting them through the usual tests with the Criminal Records Bureau that all state schools now insist on. It might be sensible for the matter to be brought to the attention of parents who send their children to such schools. I would be very worried if any child of mine went to such a school.

This debate has arisen just before the Secretary of State is expected to make a major statement on the subject of school funding. That statement is expected on Friday, the day after the local elections. It is not particularly cynical to suspect that his statement may be embarrassing for the Government. Let us hope that he is, at least, honest enough to admit that the shortfall in school funding is due to Government miscalculation of the real costs faced by schools this year and not because local authorities have squandered or squirrelled away all his money.

Mr. Randall

I also read that the statement will be made on Friday, but, as the hon. Gentleman is probably aware, the House will not be sitting on Friday. Presumably the information will be given not to the House but to a newspaper in Norwich or some such place.

Mr. Rendel

The hon. Gentleman makes a good point. His party has more opportunities for Opposition day debates than my party and he might like to consider whether that would provide a suitable opportunity to bring to the House some of the subjects he would like to discuss following the Secretary of State's statement on Friday.

When the Chancellor announced the comprehensive spending review in July, he talked about the biggest sustained rise in education spending in a generation. There is no question but that more money is going into education, but past experience has taught us not to take at face value everything that this Government claim in their spending plans. I remember that £19 billion of the first comprehensive spending review turned out not to exist. It was the product of double and treble accounting. The last Budget settlement is also a product of smoke and mirrors, hence the mismatch between ministerial rhetoric and reality, about which many hon. Members have already spoken, when schools are facing a tough Budget settlement. The outcome is that head teachers are having to consider employing fewer teachers and support staff while local authorities are being forced to choose between service cuts and increased council tax.

When the Government talk about a 6 per cent. plus increase in funding for education, they are ignoring two key factors. First, the increase is not evenly spread. Changes to the distribution formula for local government funding have created many losers as well as some winners. Councils allocated an increase in the Government's floor of 3.2 per cent. are particularly vulnerable. Secondly, the statement does not take into account the extra costs being loaded on to schools, including the increases in national insurance contributions, teachers' pay and employers' pension contributions.

Mr. Goodman

Is the hon. Gentleman aware of what the Select Committee on Housing, Planning and Local Government, which is surely dominated by Government Members, has said of the funding formula? Hon. Members will be interested to know that it said: The result is that many of the new formulae do not appear to be evidence-based and can be criticised for being insufficiently robust and more open to judgment than was previously the case.

Mr. Rendel

There are still big problems with the funding formula. There have been problems for many years now in trying to arrange a fair funding formula for local government, perhaps for education in particular. I therefore take the hon. Gentleman's point that there may still be a need to try to get funding more in line with the needs of local authorities across the country.

According to the Local Government Association, the 2003–04 settlement does not take account of additional pressures on schools amounting to more than £1.2 billion. Once those are taken into account, only £282 million of the new money is left. The transfer of some standards fund categories to core budgets is being used to mask what amounts to a cut in schools' real funding. Some £538 million has been put into the core budget to cover the cost of transferred standards funds, but last year those grants amounted to £694 million. That is a shortfall of £156 million. The Secondary Heads Association, therefore, is right to argue: The first principle of moving from Standards Fund categories to core budgets has to be that the same amount of money (increased for inflation) must find its way into school budgets. That has not happened this year.

Last year, some 15 per cent. of schools without sixth forms and 19 per cent. of schools with sixth forms had deficit budgets. The new pressures come at a time when schools are being asked to implement the time and work load agreement. As last week's statement from the National Union of Teachers made clear—little though the Secretary of State may like to hear what the NUT has to say—that is now in jeopardy.

Ministers say that local councils are to blame for failing to pass on all the money allocated to school budgets. The reality is very different. No less than 130 of the 148 local authorities are passporting the full increase to schools for 2003–04, even when the increase in school funding exceeds the increase in their overall grant.

On authorities where the increase in school funding exceeds that in the overall grant from the Government, it is worth mentioning in passing that such an increase can come about not only in authorities that have suffered a poor settlement this year but, interestingly, in those where the grant allocated by the new formula is comparatively generous—perhaps more so than that allocated by the old formula. Under the Government's new formula, such councils have hit their ceiling and are not, therefore, being granted the amount that even that formula says that they should receive. In my local authority, the total grant that should have been given under the new formula has been cut back by the ceiling. Therefore, the total extra grant provided this year is less, over the whole of the authority's expenditure, than the amount that should normally have been passported through to education alone. That has led to particular difficulties in funding all the other services.

Mr. Francois

I thank the hon. Gentleman for his courtesy in giving way yet again. Just in case the Minister believes that we are crying wolf today, may I press the point that one of the reasons why we are so concerned is because we realise that this is not a one-off but the beginning of a process, which is likely to run for years and years? From our perspective, it looks like it will only get worse. That is why it is important to protest now while we perhaps have the chance to persuade the Government to change their mind.

Mr. Rendel

I sympathise with the hon. Gentleman's point. As far as those authorities that have hit a ceiling are concerned, I hope that they will find that it is less effective next year and that they will get a better settlement. I am sure that he is right on those settlements that have been cut back by the new formula.

Interestingly, local councils plan to spend an extra £100 million this year on top of the passported amount, which shows that there is still a gross mismatch between central Government allocations and assessments of local need. The Government admitted that mismatch when they allocated an extra £28 million to 36 local education authorities. They said: We recognise that in some authorities the combination of a low increase in Education Formula Spending coupled with reductions in grant through the Standards Fund may result in lower than expected budgets for schools. The Minister may recognise those words because he used them in a Department for Education and Skills press notice released on 26 March 2003. His expression suggests that he does not recognise those words—perhaps he has forgotten including them in his press release, but. I can assure him that he did.

It is the old story of the Government retaining their grip on the purse strings while local councils are asked to accept accountability without responsibility. In other words, there is a fundamental lack of transparency. A key aspect of the transparency problem is that the funding system for education remains extremely complex and difficult to understand, which is something that other hon. Members have pointed out this morning. Even taking into account the measure of rationalisation that the Government have sought to introduce, the Secondary Heads Association says that there are still at least 66 varieties of funding available to secondary schools.

Some schools have budget deficits of up to £1 million, while others are sitting on more than £2 million—where is the transparency in that system? Where, indeed, is the fairness when money allocated for spending on today's children is being set aside by schools for a sports hall, which will be built five years down the line. Liberal Democrat research has shown that schools with the lowest numbers of pupils on free school meals are most likely to record a surplus, and there is a serious question about whether funds are reaching the schools that need them most.

Who exactly is accountable for that? Is it the Chancellor of the Exchequer, who sets the budget? Is it the Secretary of State for Education and Skills, who has responsibility for how that money is spent? Is it the Deputy Prime Minister, whose Department allocates schools money to local authorities? Is it the local authorities, which distribute the money to schools and have the option of topping it up via council tax increases? That confusion, which is built into the system, results in a confusion of accountability. May I repeat the request of my hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) for an audit of all local authorities, which should publicly declare any money that they may be holding back?

Liberal Democrats want to see education until the age of 14 funded by local authorities through local taxation with top-ups from general taxation to ensure equity. Under our scheme, local councils would be able to vary the amount paid into local schools and colleges. Our party would also support an individual pupil needs formula, whereby those from disadvantaged backgrounds would carry additional funding to the schools that they attend. The bottom line is the need for a fairer, more transparent, more accountable system, which should cater for the needs of local schools and individual pupils.

This year's settlement raises questions that go well beyond whether there is enough money in the system. More fundamentally, it poses the question whether the Government are serious about working together with schools to boost standards for all, or whether they prefer to play a game of fantasy figures in a desperate bid to avoid responsibility.

10.29 am

Mr. Graham Brady (Altrincham and Sale, West)

I am delighted to speak in this debate about perhaps the most important domestic crisis affecting the Government. I am particularly pleased to follow the hon. Member for Newbury (Mr. Rendel), who in response to an intervention gave us a valuable insight into what the Liberal Democrats see as the priorities of a Member of Parliament. He made it clear that he thought that MPs are far better off knocking on doors and claiming credit for things than coming to the House of Commons to raise concerns on behalf of their constituents, as my hon. Friends the Members for Wycombe (Mr. Goodman), for Rayleigh (Mr. Francois), for Orpington (Mr. Horam), for Uxbridge (Mr. Randall) and for South-West Bedfordshire (Andrew Selous) have rightly done.

It would be slightly unfair to criticise all Labour Back Benchers for failing to take part in the debate, because at least the hon. Member for Hendon (Mr. Dismore), although he is not here this morning, took the trouble to attend education questions immediately before the recess. He was open in his condemnation of what the Government are doing and the effect that that has had on schools in Barnet.

Mr. Randall

Does my hon. Friend think that the comments by the hon. Member for Hendon (Mr. Dismore) before the recess and his absence now are connected?

Mr. Brady

I would not care to speculate on that, but I am pleased to see that my hon. Friend is being less nice and toady to the Government than he threatened to be in his earlier contribution.

I congratulate my hon. Friend the Member for Wycombe on giving us the opportunity to debate this important subject. Many parents, teachers and head teachers across the country regard the crisis in school funding as the grossest betrayal that the Government could have perpetrated. Having seen Labour pledge in 1997 that its three top priorities would be education, education and education, they are bewildered to see the state into which some schools are being plunged by the Government.

Does the Minister understand the anger and frustration felt by parents, teachers, heads and governors? All of us are paying massively higher taxes both locally and nationally but seeing our children coming home from school with letters in their satchels such as the one written by the chairman of governors at Gospel Oak primary school, Ms Fiona Millar, which was referred to earlier.

As the Minister knows, the situation is worse in London and the south-east. In Barnet, schools are suffering a shortfall in their budget of up to £450,000, and one head teacher told me shortly before the Easter recess: It's breaking my heart. We run a good school here, but we are struggling to find every penny". The Minister blames the press and the media, as he did last night on Channel 5 news. He shakes his head, but I heard him do that. Faced with an early-years teacher from Barnet who was distressed by the fact that she was having to ask parents to buy coloured pencils for their children to bring into school, he said that there was no crisis but that the media had started to pay attention to something. I have been aware of the looming crisis from my visits to schools and conversations with head teachers for weeks and perhaps months, so he should have been, too.

The media were slow to pick up the issue precisely because of the natural reluctance of head teachers to go public and to say that their schools face difficulties. That is why, six weeks or so ago, I conducted an unattributable survey of the top 25 state schools in the country, which showed an alarming picture beginning to develop. We found that of the 20 schools that responded, 17 faced a budget shortfall. Seven were expecting cuts but were awaiting final figures. Five schools said that they faced cuts of at least £100,000, and two faced cuts of at least £250,000. At least one school was looking at redundancies this year, while others were thinking about redundancies in future years. Anticipated cuts ranged from £60,000 to £300,000, and the average shortfall for the schools that were able to give a figure was £155,000.

We learned that those schools are not alone in considering redundancies. We heard from my hon. Friend the Member for Rayleigh that 70 redundancy notices had already been issued in Essex by the end of March. In one constituency alone—that of my hon. Friend the Member for South-West Bedfordshire—10 redundancy notices have already been issued. Since then, more and more schools have spoken out in anger and frustration.

We learned from a report in the Evening Standard on 14 April that the St. Marylebone Church of England school in London said that it may have to shed six teachers, and is asking parents to pay £100 each to avert the crisis. The head teacher of Christ's college in Barnet, Mr. Paul O'Shea, said that his school was £450,000 short of the £4 million that it needed to achieve a standstill budget. In The Daily Telegraph on 29 March, he said that he had never known the situation to be as bad as this, the Government were in denial when they said that there was nothing wrong with the formula and there must be something wrong.

We know that something must be wrong because we are hearing it from so many people. The Westminster head teachers' consultative committee sent a letter to me on behalf of all Westminster schools in which it said: We, the Head teachers of all Westminster schools wish to make it clear that they will be unable to provide effective full-time education for pupils with the funds allocated in the financial year 2003/4. Consequently, the targets set in the recent target setting round will no longer be valid and standards will inevitably suffer. As my hon. Friend the Member for Rayleigh said, 70 jobs are already being lost in Essex. We have heard that up to 90 teachers and teaching assistants face the sack in Bournemouth and Poole. We also know that Thornbury primary school in Plymouth expects to make five members of staff redundant, including two teachers, to counter a shortfall of £80,000 in its budget. We have even heard from one of the few employees of the Downing street machine with any connection to reality. My hon. Friend the Member for Wycombe quoted Fiona Millar's comments, but it is worth repeating them, as her letter as chairman of governors to parents made it clear that the Government are to blame. She says: The Government has changed the way that it allocates block grants to councils and has moved money from the south east to the north. Camden has been one of the authorities that has done least well out of this change. There has been a significant increase in the contribution that employers (including schools) have to pay to national insurance contributions. There has been a significant increase in schools' contributions to the teachers' pensions fund. There has been a significant reduction in a grant paid to schools called the School Standards Fund. My hon. Friend the Member for Uxbridge should be commended for having considered the question from a business point of view. A root cause of the problem is that the Government did not understand the consequences of increasing taxes, or what increasing employers' national insurance contributions would do to businesses throughout the country. Nor did they understand that all employers, whether in the public or private sector, would be hit, which they have been.

The problem affects not only the south and south-east. The head teacher of the King Edward VI school in Morpeth, Northumberland said that half of secondary schools in her area were short of an average of £100,000. She said: We were extremely angered by this year's budgets. In my constituency, Mr. Tarun Kapur, the head of the outstanding Ashton-on-Mersey school—a sports college and a beacon school—told Manchester Metro News of a shortfall of between £60,000 and £80,000. He is not alone: schools throughout my constituency are in a similar position.

It is a massive problem for schools. Not only have they to deal with a shortfall today, but they have to contemplate redundancies and cuts in their budgets for next year simply to achieve a balanced budget.

Andrew Selous

Does my hon. Friend agree that the situation has severe consequences for people thinking of entering the teaching profession? Only three clays ago, I was talking to a teacher in an upper school in my constituency who told me that it advertised for a post but had only one applicant, who was not of the ideal standard. The whole background, which the national press are currently highlighting, is not conducive to attracting people into the profession when their futures are uncertain.

Mr. Brady

My hon. Friend makes a valid point. I was at Altrincham grammar school for girls yesterday morning. It is one of the best schools in the country. Even a school such as that, which to some extent has been insulated from the difficulties that other schools have faced in recruiting staff, has fewer qualified applicants for the posts that it advertises. Not only is this an immediate crisis for schools seeking to maintain the standards, but it makes a mockery of the Government's aspiration to tackle the problems of teacher work load.

I should like to indulge in a short anecdote, which will make the Minister slightly jealous. I did get away with my wife for a few days over Easter and did not get to the teaching union conferences, perhaps like the Secretary of State himself. While I was sitting in a hotel bar—I will not say where as it will make the Minister too jealous—I overheard a conversation between two teachers. They did not know that I was there. The Minister might unkindly point out that, even if they had known, they may not have realised who I was. The conversation went as follows: "Will you benefit from the Government's teacher work load agreement?" It is unbelievable, but these things are discussed by people who work in schools.

The Minister for School Standards (Mr. David Miliband)

That is good.

Mr. Brady

The Minister will not be so pleased to hear the response. The other teacher said: "I will give you £1,000 if I am not still photocopying my own lesson plans in September. It simply is not going to happen." It is not going to happen because schools are supposed to change the work load arrangements for teachers, the working hours and the tasks and functions that teachers are expected to carry out by bringing in a raft of new support staff. How can they possibly do that if they are faced with a budget shortfall in maintaining their current standards and levels of provision?

Faced with a crisis in school funding today, what are we promised? We are promised yet another Government review tomorrow. Perhaps I can give the Minister a few suggestions. First, if one increases taxes on employers someone has to pay them. That includes public sector employers. As the Chancellor looks at the black hole in the Government's finances, which he is told remains after this year's Budget, and contemplates possible future tax rises he should consider the debilitating effect on schools and hospitals, just as on businesses.

Secondly, if one charges schools more for teachers' pensions, the money has to be found from somewhere. It is another tax on the employer. Thirdly, he cannot take away huge sums of money from the standards fund and then blame local authorities for budget cuts. Fourthly, having legislated last year to take powers to direct local authorities to ring-fence their schools budget, the Government look absurd when they try to blame local authorities, as they have done this week, for the amount of money that is going into schools.

If the Minister really wants a way of funding schools that is fair, transparent and simple enough to explain when he goes on the "Today" programme he should look at the system that Labour dismantled in 1998 when they abolished grant-maintained schools. By adopting a national funding formula for all schools, based on the number of pupils, but taking account of local needs, we will create a system of school funding that is straightforward, fair and above all puts real control into the hands of heads, staff and governors.

Mr. Miliband

No LEAs? Is that the hon. Gentleman's policy?

Mr. Brady

We will be interested to hear whether this is the Minister's policy. If it is, it will be a welcome, albeit belated U-turn. We will be looking for an indication that the Minister really understands the anger, frustration and sense of betrayal felt by parents and teachers that a Government who promised that their three priorities were education, education and education are delivering tax and spending and cuts and redundancies.

10.44 am

The Minister for School Standards (Mr. David Miliband)

Thank you for starting us off this morning in such a positive frame of mind, Mr. Deputy Speaker. This has been a rather good debate and I am grateful to the—[Interruption.] I did not catch that.

Mr. Randall

I am happy to agree with the Minister. The reason for the excellent debate is the lack of participation by Labour Members.

Mr. Miliband

That is somewhat unfair. Given that the hon. Gentleman seemed to be in toadying mode during his remarks, it is unfortunate that he has spoiled the party so quickly.

Some rather good points were made in the debate. The hon. Member for Rayleigh (Mr. Francois) spoke about a need for three-year budgets. It is argued that there is a difficulty when standards funds or central funds are reduced. The gain is that there is less bidding, to which the hon. Member for South-West Bedfordshire (Andrew Selous) referred. Of course, when central funds are reduced, there is a disproportionate effect on the schools that benefited from them, but none the less he made a useful point. The hon. Member for Wycombe (Mr. Goodman) deserves the congratulations of all hon. Members, according to protocol. He raised the important issue of disadvantaged pupils in relatively wealthy authorities, a point to which I shall return.

There were low points, but I shall not go into them in detail. Suffice it to say that the data on schools funding has not been published before the local elections, because it is against the law to publish politically contentious material before polling day. We have said that we will do so as soon as possible afterwards.

The hon. Member for Wycombe deserves recognition for another reason. I think that he is the only hon. Member so far to place on the record his thanks and congratulations to the teachers in his area for their work and the outstanding results that they have been achieving. I associate myself with those remarks—[Interruption.] The hon. Member for Altrincham and Sale, West (Mr. Brady) talks about money, which is extremely unwise, because the details of the funding cuts in Trafford between 1992 and 1997 create a stark contrast with the increase in funding between 1997 and the present day, and for the next three years. I warn him to be more careful in venturing on to that terrain.

As I said, the hon. Member for Wycombe highlighted some of the important work being done in primary and secondary schools in his constituency. However, the debate focused on funding and I shall pick up a number of the points that were made. The most important was the plea from hon. Members that the Government take their views extremely seriously. I hope that they will take it in the right spirit when I say that we must take even more seriously the views of the head teachers and governors who write to them and to us. There is no question of complacency on the part of the Government.

This is a unique year for a number of reasons, notably the changes to the teachers' pension fund and the significant changes to the local authority funding formula. That change causes uncertainty, but we are committed to working with schools and local education authorities to ensure that—

Mr. Brady

Will the Minister give way?

Mr. Miliband

Just let me finish my point. We are committed to working with schools and LEAs to ensure that, when schools make decisions about their budgets for the coming year, they are comparing like with like and the full budget for 2003–04 with the full budget for 2002–03. I shall return to that. I point out in particular to the hon. Members for Rayleigh and for Newbury (Mr. Rendel) that there is a significant difference between an LEA decision to passport all funding given to it for increases in schools to the education budget, and a decision to allocate all that money to schools. The difference between passporting and allocation is at the heart of many of the difficulties that some schools face. I will return to that if I have time.

Mr. Brady

The Minister says that this will be a unique year, and schools up and down the country will hope that that is true. Will he give a clear undertaking that, should there be any future change in the actuarial valuation of the teachers' pension fund or the need to finance it, the increased costs will be borne entirely by the Treasury, not schools, as has been the case this year?

Mr. Miliband

There has been full recompense to the schools system, above the increase in education formula spending share, for the pensions fund increase, as I shall make clear. For 2003–04, the total national increase in revenue funding for schools and LEAs is about £2.6 billion or £2.7 billion—an increase of about 11.6 per cent. and at least £250 million more than the figure relating to the national pressure from pay, pensions, national insurance and grants that are ending. We calculate those pressures to represent about 10.5 per cent.

Mr. Bendel

Will the Minister give way?

Mr. Miliband

Let me finish the point. To put the 11.6 per cent. increase another way, the education formula spending share for 2003–04 has increased by about 6.5 per cent., in addition to compensation of £586 million for the pension contribution increase, and £500 million of grant funding transferred into general funding in 2003–04.

It is important that the hon. Member for South-West Bedfordshire should know that I am spending less money this year. Over the three years of the spending review, central Government grants are declining because we want to cut back on the bid culture that the hon. Gentleman deplores and fears may distract teachers from the important business of teaching. None the less, the apparently happy consensus on reducing central standards funds can have difficult effects on the ground, where schools that have been successful in their bids may lose money.

Mr. Bendel

The Minister said that this is a unique year. Can he also assure us that it will be unique in being the only year in which the ceiling is applied? In future years, those whom even the Government believe should get more money should get that money.

Mr. Miliband

As the hon. Gentleman knows, and as other hon. Members have said, the Government have to take their decision on floors and ceilings for future years. On the basis of this year's experience, we are sure that floors and ceilings are a necessary part of the system. One of the problems at local level is that damping mechanisms do not exist in local education authority funding formulae: there are no floors to protect schools that suffer because of changes in their pupil numbers or other matters.

For the benefit of the hon. Member for Buckingham, I shall address the significant issues that have arisen—

Mr. Francois

The hon. Member for Wycombe.

Mr. Miliband

I apologise the hon. Member for Wycombe.

Mr. Francois

The Minister has just confused my hon. Friend the Member for Wycombe (Mr. Goodman) with my hon. Friend the Member for Buckingham (Mr. Bercow).

Mr. Miliband

I should certainly not want to do that. Perhaps the hon. Member for Buckingham (Mr. Bercow) spends his time reading the Hansard reports of Westminster Hall debates, and I apologise to him if my confusion causes him any embarrassment.

Since 1997, the education spending assessment in Buckinghamshire has risen by about £60 million, which is an increase of more than 35 per cent., and when adjustments to the baseline for 2002–03 are involved, the increase is about 6 per cent. Funding through the formula is, however, only part of the picture. The standards fund has increased from about £3 million to £16 million, and the direct grant to schools—the schools standards grant—is now worth £6 million. It is also noteworthy that capital investment in Buckinghamshire has risen from £12 million to £28 million.

The new funding formula has aroused a lot of interest in the debate, and allegations of unfairness have been made, to which I will return. I hope that every hon. Member agrees with the important principle that similar pupils in different parts of the country should have similar amounts of money attached to them. We would all agree that there are certain pupils who have extra needs, and that they should have extra money attached to them by central Government, wherever they live. Those principles have been applied in the development of a new formula.

The new formula has three parts: first, a simple £2,000 for a primary school pupil and £2,660 for a secondary school pupil; secondly, an additional amount for additional educational needs, notably for children who are growing up in disadvantaged circumstances, about which the hon. Member for Wycombe was concerned; and thirdly a recognition of additional cost—the so-called area cost adjustment.

I shall deal in detail with those points. In introducing the new system for additional educational needs, we wanted to recognise poverty in all its forms. For a relatively high-employment area such as Buckinghamshire, which has some low-wage work, that was a significant decision. Should poverty be defined only by reference to the number of people on income support—as a measure of unemployment—or should there be recognition of the additional costs that sometimes arise for pupils whose families are in low-wage work? The hon. Member for Wycombe will be pleased to know that Buckinghamshire, as well as other areas, benefits from the Government's decision to recognise pupils in low-wage households in the formula.

Spurious allegations have been made that the funding system has been distorted to the disbenefit of Conservative areas of the country. Last night, I took the time—as, no doubt, did other hon. Members—to scrutinise the Labour party's website. The website has some useful data that gives the lie to some of the allegations that have been made.

Conservative councils such as Buckinghamshire, Cambridgeshire and Wiltshire have all benefited from substantial grant awards that are well above the average. Tory-run councils such as Cheshire have benefited from grant increases that are substantially above inflation. Conservative Opposition Members may be sorry to hear that some Liberal Democrat councils have also done well out of the settlement. Moreover, as several hon. Members have said, some high-profile Labour councils have not felt especially well-served by the new system, but as I said, its purpose is to treat similar pupils in different parts of the country in the same way.

Mr. Brady

Earlier, the Minister referred to the funding situation in the borough of Trafford, where my constituency is situated. That is one instance of an authority where Labour has been clinging to control for some time, albeit with a minority of the votes cast. Will the Minister say whether it is the Labour Government or the Labour council that is to blame when a head such as Tarun Kapur at Ashton-on-Mersey school in my constituency says that he is facing a shortfall of £60,000 to £80,000 in the next year?

Mr. Miliband

It would be wrong for me to comment on the case of an individual school on which the hon. Gentleman says that he has data or has visited recently. I know that Trafford has benefited enormously—to the tune of a 32 per cent. increase in the education SSA—and that its capital funding has doubled. I am perfectly happy to consider the individual case raised by the hon. Gentleman but it would be wrong for me to do so without any basis in fact.

The hon. Member for Wycombe asked certain questions about Buckinghamshire's final allocation of 6.4 per cent. and it is important that I address them. Buckinghamshire is one of the least deprived authorities in the country. It has a below-average proportion of families receiving income support—about 9.3 per cent. compared with a national average of about 20 per cent.—and on ethnic minority indicators Buckinghamshire is just below the average on the primary measure—9 per cent. compared with 10 per cent.—and is above average at secondary level. Such data are fed into the formula and have delivered to Buckinghamshire the amount of money that it has to allocate.

Central Government are not the only funder of schools and certainly do not fund schools directly, although I was interested to note that the hon. Member for Altrincham and Sale, West seemed to be announcing a new Conservative policy when he said that he was in favour of central funding. That will be news to the vice chairman of the Local Government Association, whom we must contact, who was on the radio with me recently denouncing any thought of a national funding formula. 'We shall have to scrutinise carefully the Hansard report of the hon. Gentleman's speech, as what he said will be news not only to his elders and betters but to his colleagues in local government.

As I said, the situation in 2003–04 is unique; the devolution of funding to schools depends on a partnership between LEAs, which have their own funding formulae, and central Government. Each LEA sets its own council tax, decides how much money in the schools' budget is to be passed on to schools; has its own formula for distributing funding to schools and its own priorities between primary and secondary provision. That is a healthy part of our constitutional settlement. As we do every year, we are collecting data from every LEA—their so-called section 52 returns—about their budgets. About 100 LEAs have so far sent us the information and some significant patterns are emerging. They bring out the difference between passporting money into education and devolving, or allocating, all the money to schools. That is why we talk about money that is as yet unallocated. About half the LEAs have more than £2 million still to be allocated to individual schools. It may be earmarked for the education budget but it has not been allocated to schools. Some have more than £10 million, which may be of particular interest to the hon. Member for Rayleigh, but he will have to contain himself until Friday to see the full details.

The information suggests that from LEAs whose returns we have analysed so far, about £340 million is still to be allocated to schools on a pro rata basis—about £500,000 that schools can still expect to see. There are big variations in the proportion of the increases in schools budget that are actually being passed to schools. In three quarters of LEAs, the increase in funding that is going direct into the individual budgets of schools is lower than the overall increase that the LEA has made for school funding.

In some areas, there are major increases in special needs funding and nearly a quarter of LEAs, significantly in a unique year, are transferring money from the revenue budget into the capital budget. There may be all sorts of local reasons why those decisions are being taken, but our message is simple: LEAs and schools need to sit down and ask some hard questions about those decisions. Has all the standards fund been distributed? Has the whole of the individual schools budget been allocated or is some money still waiting to be devolved? Has the LEA formula spread money fairly between schools? Such discussions should be taking place at local level because it is important from our point of view that no school takes a precipitate decision about employment or other matters in the course of the next year without full knowledge of what its budget will be. I am proud that the budgets of schools have risen by an average of £640 in the past five years and I look forward to that continuing in the future.