HC Deb 17 June 2003 vol 407 cc25-33WH

11 am

Mr. David Cameron (Witney)

I am delighted to have the opportunity to introduce the debate, and I am pleased to start by congratulating the Minister of State on her new responsibilities, which are, I think, for young people. The fact that she is responding to the debate I take as a compliment to my relative youth.

Although the subject of the debate is school funding in the south-east, I shall focus principally on Oxfordshire and on my constituency, although the same issues affect us across the south-east. I have tried to get to the bottom of the funding conundrum. It is a mystery: a Government committed to education, education, education have got themselves into a position in which schools set deficit budgets, teachers lose their jobs, and difficult cuts are made in the curriculum and elsewhere.

I want, in the tradition of Westminster Hall, to be reasonable, not political, and to get some answers, not just to score points, so I shall try to proceed in that spirit. There is a lot at stake, and we should not play games. People in my constituency are genuinely worried; I have had a huge mailbag from school governors, parents, teachers, heads and others. As the leader of the west Oxfordshire secondary head teachers, Mr. Rod Walker of Henry Box school put it in a very succinct letter: There is a problem. None of us anticipated it. The questions are: how can we put school funding back on track for 2004/5 and what can be done to alleviate the problem in 2003/4. Those are the subjects that I want to address.

Inevitably, to get to the bottom of what has gone wrong, there has to be some element of a blame game because there are three possible groups to blame: the schools, the local education authorities and central Government. I have considered the matter carefully, and I can only come to the conclusion that central Government funding decisions are principally, although not wholly, to blame.

The only finger of blame that can be pointed at the schools concerns the way in which performance-related pay has been used in many instances. The Government assumed for funding purposes that only 65 per cent. of teachers would pass the threshold for performance-related pay, whereas the actual figure in most schools is more like 95 per cent. If the Minister considers the problem of teacher vacancies and unfilled posts in places such as Oxfordshire, she will realise that we need high levels of pay for teachers. When a teacher resigns from a school in my constituency, there are often only two or three applicants for the post.

The first mistake that the Government made was hyping the education budget. Like others, I fell for it. Ministers told us that we would receive £2.6 billion, an increase of some 11 per cent. Schools were, naturally, very excited by the prospect of the extra money, but by the time deductions had been made for teachers' pay changes, pensions, national insurance increases and other changes, the real increase was more like £250 million, or 1 per cent. As the acting head of finance in my local education authority put it in a letter to local councillors: I do have sympathy for our schools in that we have only been able to give them a standstill budget at a time when the DFES is continually announcing significant growth in financing for education. The lesson to learn for next year is not to hype.

That deals with the past. What needs to be done now? The Government must accept the scale of the problem in the south-east, and in Oxfordshire in particular. I do not claim that schools in Oxfordshire will sack hundreds of teachers; they are much too responsible for that. I met the secondary heads last week. They are moving heaven and earth not to make teachers redundant, but what is happening is just as worrying—there are significant school deficits. Henry Box school in Witney has a deficit of £70,000, Burford School £100,000 and Eynsham School £45,000. Those deficits cannot go on year after year, or the schools will build up significant debts.

All the schools report the same thing: they are having to run a staffing-led curriculum. That means that they take the staff that they can afford, and they have to do the best that they can in the circumstances—not what they planned to do, what the Minister or I would like them to do or what the parents want them to do, only what they are able to do. That means larger classes—in one secondary school in my constituency, there will be classes of between 25 and 31 in year 7—and subjects are being dropped. One secondary school has virtually had to drop business studies altogether.

Vital repairs are being put off. The head of another secondary school told me that he is spending some of the repairs money on salaries because he can and because he has to; it is the only thing that he can do to keep the show on the road. All of the secondary schools said that there would be narrower choices at A-level. I hope that the Minister will look carefully at the way in which local learning and skills councils are funded, because the squeeze on funding seems to be particularly bad at A-level. All schools, including primaries, have said that there will be fewer teaching assistants. In a debate in the House on community services, I mentioned the serious problems that Charlbury primary school and William Fletcher primary school in Yarnton were having, about which I have written to the Minister.

The leader of Oxfordshire county council has written to me to make similar points. He said that schools will not fill teacher vacancies, with a consequent impact on curriculum coverage, or continue lapsed temporary contracts. Their use of teaching assistants will decline, and they will reduce supply cover budgets and increase head teacher training commitments and mixed-age primary classes. All those changes will have a damaging effect on the education of children in Oxfordshire.

It is important that we ensure that the Government understand that the fault does not lie with the LEA. I wrote to the Minister for School Standards about this, but I shall run through the figures again to make the point absolutely clear. The Department for Education and Skills asked every LEA four questions. The first was whether it passed on 100 per cent. of the schools budget increase that came through to it. Oxfordshire's answer is clear: yes, it did.

The second question was how much the non-delegated element of the schools budget had increased and why. In Oxfordshire, that element of the budget increased slightly, because of an increased requirement to fund places for three-year-olds, rising from 68 to 85 per cent. of three-year-olds in 2004. That is to implement a Government policy, which was previously funded through a specific grant, so the LEA has no choice. The special educational needs budget has also increased slightly, in response to increased demand for those services. Again, the LEA cannot do anything about that.

The third question was whether revenue funding provided to the LEA was being used for capital purposes. Oxfordshire has some £5.7 million of such funding. Just over £1 million is for linking schools to broadband—we support that Government policy of giving schools access to the internet—and the remainder is for essential repairs, although a similar figure was spent from revenue for capital last year, so that cannot be the reason for the funding problem.

The fourth question was about unallocated money. In Oxfordshire, there is a contingency fund of £1.9 million, which is a relatively small sum, to cover the reorganisation of the middle schools system in the city of Oxford. Again, that is necessary, but even if that were cancelled and the money spread across the county, it would make very little difference.

I hope that I have proved that the fault does not lie with the LEA, which is a good one. It delegates almost its entire budget and wants to fund its schools properly. It is not playing politics but wants to get the right answer, and it is not too late for the Government to take action this year. The head teacher of Burford school suggested that the Government could directly fund schools, as they have done in the past, and if they gave £100,000 to each secondary school and £50,000 to each primary, that would solve the problem. We would not have teacher redundancies, cuts in he curriculum or any of the other problems that I have described.

The Minister may want to know where the money would come from, and I can give her two suggestions. The first is to use the £1 billion underspend in the DFES, and the second is that the Government should examine their running costs, which for central Government as a whole have increased by £3.5 billion, or 20 per cent., since 1997. I know from friends who work in the DFES that not all of that money is spent wisely. The Government should start to plan to reduce their central costs, as every business is trying to do, and to devolve more money to schools. They are asking the LEAs to do that; it is time that the Department did it too.

The Government should also quickly examine next year's situation. All the head teachers to whom I have spoken made that point. This year, they will cope one way or another, but they are desperately worried about next year for two reasons. The first is the dampening grant—dreadful jargon—of £4.7 million, which Oxfordshire is to lose; it will not be available next year. The second is teachers' pay. As more teachers pass the threshold and are being paid more, the gap between what the Government are saying is available and what is actually needed will grow. They will not be able to claim to be shocked at that funding gap, as they have this year. They have been warned, and I hope that the Minister will make preparations for it.

I want to ask the Minister some specific questions. She may not be able to answer them all now, but governors and teachers in my constituency are anxious for answers. Announcements have been trailed in the media concerning the fact that there may be an additional £50 million to cover pay pressures caused by the number of teachers passing the threshold to the new, higher pay spine. Are those press reports true, and how and when will that new money be released? We would love an answer.

How will pay pressures be dealt with in future? I say again to the Minister that that is probably the most important question of all for those of us who live in areas of high housing cost where we need high pay to recruit and retain good teachers. I mentioned the significance of the dampening grant of £4.7 million that Oxfordshire receives this year but will not get next year. How will that be dealt with in 2004, and when we will know the answer?

Schools have been told to spend delegated money for capital on salaries and other revenue items. I mentioned a school that has spent a large amount of capital funding in that way. How will that shortfall be addressed in future? This is a last-minute plea to the Minister, but I make it in earnest. West Oxfordshire has very good primary and secondary schools; they are inventive and they are trying hard to deliver a high quality of education.

Two teachers from Henry Box school in Witney came to see me yesterday about a project to set up a permanent link with a school in Rwanda, not only for pupil exchanges and to teach in that school, but to record living history as a testament to the dreadful genocide in Rwanda 10 years ago. I know that that is exactly the sort of the thing that the Minister wants to encourage, but I fear that we are letting schools down this year, partly because this was so out of the blue that they had no time to plan.

I end with a final plea to the Minister. I believed that the Government were trying to get rid of some of what I call the fiddly grants—if schools do a little of this or that, they receive more money. The message was that more money would go straight to the schools and more funding would be calculated on a per-pupil basis. Why then do we still have all these extra schemes such as the leadership incentive grant? Secondary schools in my constituency are desperate for extra money. They apply for everything that they can from the DFES, but they never qualify for any of it. In the case of the leadership grant, one has to qualify; one does not apply. The money, £125,000 for three years, will simply not be available to areas such as mine.

Another scheme is leading edge schools. There are no leading edge schools in Oxfordshire. Why not? If the scheme is about linking very good schools with less well performing ones, I could recite a list of fantastic secondary schools in my constituency which are itching for that money and would love to link up with schools in Banbury or Oxford, which they would do brilliantly.

A very experienced head teacher told me that the problem with the current system is that it is as if there is only one place where good ideas in education are allowed to germinate—the DFES. I know, as I am sure the Minister does, that that is simply not true. We must move to a system in which we place more trust in the governing bodies and head teachers to spend more of their own money. If the Government have learned anything from this year's problems with education funding—a crisis that has surprised them as much as the schools—it is that we need to move to a system in which more money is devolved directly to schools. The attraction of giving schools the money and letting them get on with the job have never been greater, and I hope that the Minister will give that serious consideration in the year ahead.

11.14 am
Mr. Andrew Turner (Isle of Wight)

rose—

Mr. Peter Atkinson (in the Chair)

Order. Can I confirm that the hon. Gentleman has the permission of the hon. Member for Witney (Mr. Cameron) and the Minister to make a contribution?

Mr. Turner

Yes, Mr. Atkinson. I congratulate my hon. Friend the Member for Witney (Mr. Cameron) on securing the debate. As a former governor and teacher in Oxfordshire, I am familiar with some of the schools that he has, rightly, applauded.

The Isle of Wight falls within the curiously named south-east region, as the Minister will know. I have met middle school and secondary school head teachers who are concerned about cost pressures. I have no interest in defending Isle of Wight council, but it has included £800,000 more in the education budget than it was necessary—in the Government's view—to passport to schools. The council tax has risen by 14 per cent. this year, and by 34 per cent. in the past two years. However, head teachers still face the problems of performance-related pay thresholds, the increase in pension contributions, the absorption of the standards fund's responsibilities into the base budgets without a parallel increase in funding, and of the profile of the teacher work force on the island, which contributes greatly to the security and experience from which pupils benefit. Other problems include Government pressures such as national insurance and the fact that the cost of the Criminal Records Bureau checks will double this year. The teachers' contract that will be unveiled this afternoon will cost £1 billion, but the Government are funding it to the tune of only £60 million.

Those are the threats and the current problems facing schools. I hope that the Minister will say something about the remedies to those problems. Two remedies have been mentioned; one is transferring capital into revenue. Some of that capital is already committed to projects; in some cases, it has already been spent. The other remedy is that schools can overspend. They can overspend this year, but they will have to meet that overspend next year. Governors and head teachers are concerned about their legal liabilities. I ask the Minister to state whether governors face any legal liability for an overspend in a particular year. I thank the Minister for allowing my intervention. I look forward to hearing her answers.

11.16 am
The Minister for Children (Margaret Hodge)

I congratulate the hon. Member for Witney (Mr. Cameron) on securing the debate. I understand his interest in how the new funding arrangements have affected schools in his constituency, and I understand the interest of the hon. Member for Isle of Wight (Mr. Turner) in the broader context of the south-east.

I start by paying tribute to teachers in Oxfordshire for the excellent work that they are doing. We in the House should recognise the outstanding work that is carried out in our schools. For example, the percentage of pupils leaving primary schools in Oxfordshire who are doing well in English has risen from 66 per cent. in 1998 to 76 per cent. in 2002; in maths, that figure has risen from 61 per cent. to 73 per cent.; and, in science it has risen from 73 per cent. to 87 per cent.

At GCSE, the percentage of young people achieving five or more passes at grades A* to C has risen from 46.5 per cent. in 1998 to 51.5 per cent. in 2002. I am sure that the hon. Member for Witney will join me in congratulating the teachers in his area on that success.

There has been a record £2.7 billion increase in funding for schools this year, and that will go up by another £1.4 billion in 2004–05. With a further increase of £2.1 billion in 2005–06, that will mean a total cash increase over the three years of more than £6 billion. That is an injection of real money after—I have to say to the hon. Gentleman—years of cuts and a lack of investment in our school infrastructure.

In Oxfordshire, the picture on funding is striking. Between 1997–98 and 2002–03, Oxfordshire's education spending assessment increased by more than £67 million—an increase of 34.6 per cent. over five years. I am delighted that Oxfordshire has decided to passport that full increase in its schools funding assessment on to its schools budget. Funding through that formula is only part of the picture. The school standards direct grant takes account of both revenue and capital. As a result, a typical primary school with 250 pupils will receive £10,000 more this year than last, a rise from £40,000 to £50,000, and a typical secondary school with 1,000 pupils will receive £50,000 more this year, a rise from £115,000 to £165,000. Such funding did not exist under the previous Conservative Government.

The same picture emerges for capital. That, too, has increased. One of the most shameful things that happened under the previous Government was the under-investment in the school buildings in which our teachers teach and our pupils learn. In 1998–99, capital funding in Oxfordshire was £10.6 million; this year it is £33.9 million. I hope that the hon. Gentleman appreciates that.

This has been a year of change for the school funding system. Partly in response to the requests of LEAs and schools, we have introduced a range of changes to education funding and the wider local government finance system. In particular, changes to the distribution formula for education formula spending, together with the ending of a substantial body of ring-fenced grants from the Department's standards fund—just what the hon. Gentleman asked for—have resulted in different LEAs and schools receiving a wide range of year-on-year increases in overall support for education. Both sides of the House agreed that reform of the education funding system was badly needed. It was out of date, complicated and hard to explain, it did not reflect the division of responsibilities between schools and LEAs, and it was widely seen as unfair because it was based on spending patterns that dated back to 1991.

Our aim in the new system is to ensure that similar pupils in different parts of the country receive a similar amount of money from the Government. We want funding to recognise the separate responsibilities of schools and local education authorities. That is why the schools and the LEA funding blocks are separate under the new system.

As hon. Members know, there are three basic funding entitlements for all pupils: first, for primary and secondary schools; secondly, factors for deprivation and additional educational needs; and, thirdly, factors to reflect area costs for salaries and recruitment and retention, which I know is an issue in the hon. Gentleman's constituency and in that of the hon. Member for Isle of Wight.

The new system is based on evidence suggesting that authorities with significant deprivation that face additional costs in recruiting and retaining staff need to spend significantly more to achieve the same results for the children. I know from my constituency that many schools, particularly those in London and the south-east, face particular pressures because of the extra cost of recruiting and retaining staff. However, the new system recognises the fact that authorities outside that area face similar problems. That is why we refined the system for area costs, making it much more sensitive to local circumstances. I hope that hon. Members recognise that high cost areas can exist outside the south-east and that there are variations within London and the south-east.

We acknowledge that some local authorities have to adopt special measures to recruit and retain teachers, which leaves them facing extra costs. The new system provides additional allowances to help recruit and retain staff; to cover the costs of supply cover for vacant posts, which is generally higher than the cost of employing a permanent member of staff; and to help with the costs of recruiting and advertising for staff. The allowances are not based on teachers' pay scales, because they do not fully reflect differences in the cost of recruiting and retaining staff in different areas of the country. They are based on general wage differentials. The result is that the coverage of the adjustment for area costs has been extended; it will now cover 99 authorities, whereas it previously covered only 59. I hope that extra funding is available.

In introducing the new system we also took account of the additional costs that schools face due to the additional educational needs of their pupils. The current system for doing that is based on odd data, including the 1991 census and such things as whether the children have lone parents or parents who were born abroad. It also uses information about children from families in receipt of income support. The 1991 pattern of expenditure is not a good predictor of need to spend now. Pupil characteristics in 1991 do not best measure the additional educational needs of children today. In particular, just because a child's parents were born abroad, it does not necessarily mean that that child has additional language needs.

Under the new system, we reflect a wider definition of poverty. The number of children of parents on income support is supplemented by the number of children of parents in receipt of the working families tax credit. That picks up those children whose parents are in low-paid work. The measure has received particular support from rural authorities, like those of the hon. Gentlemen, where pay rates are lowest.

The new formula also contains a sparsity element to reflect the costs of home to school transport in rural areas such as Oxfordshire, and to help rural primary schools. We have increased the funding for sparsity since the summer consultation in response to evidence received.

I turn to the funding problems that have been faced by a number of authorities. In our view, the funding of schools is a shared responsibility between central and local government and we recognise that the challenge for us all this year has been to manage the complex interaction of a series of changes. We have transferred funding to reflect the teachers' pensions increase and we are working through the teachers' pay settlement. Although there have been large cash increases in education overall this year, we recognise that the cost pressures have been substantial and have varied from school to school, because of threshold and other issues, and from authority to authority depending on cost structures and local deployment of resources.

We recognised that in some authorities the combination of a low increase in education formula spending share and reductions in grant through the standards fund was likely to result in low budget increases for schools. That is why we announced the extra £28 million, to ensure that the effective increase in education funding for LEAs and their schools between 2002–03 and 2003–04 is no less than 3.2 per cent. per pupil. That protected pupils in Oxfordshire.

We have provided extra money for London LEAs and we have met the full cost of the teachers' threshold, which will be paid by additional grant from my Department. The hon. Gentleman was right to draw attention to that as a continuing problem that we need to tackle in next year's funding settlement.

Mr. Cameron

Will the Minister clarify whether the extra money for funding teachers will be available to LEAs like mine for this year?

Margaret Hodge

Indeed it will. We sent a letter to LEAs on 2 May, which I hope that the hon. Gentleman has seen, in which the £205 million performance-related pay grant that the Department will be paying was set out. We also announced a relaxation in the regulations to devolve capital that could be used for revenue purposes and the hon. Gentleman is right to say that that was for one year only. On damping, that will carry on into 2004–05, both for the education formula and the overall revenue support grant. Although we have not yet set them, there will have to be floors and ceilings to carry on the transition to the new local government finance system. I recognise what the hon. Gentleman says: we need an early resolution to the issue of funding for next year, and we are working as hard as we can to achieve that.

The new system is a substantial improvement on the old. When it settles down, we shall see that. It is evidence based, not backward looking; it reflects LEAs' and schools' separate responsibilities; it uses up-to-date data; it is relevant to the current needs of children and it is simpler than the old system. We promised a fairer, simpler system and I believe that that has been delivered.

We must look forward and learn quickly from the experience of this year, so that we can put in place better arrangements for next year. We are working hard with all stakeholders and our priority is to ensure that all schools receive a reasonable per pupil settlement in 2004–05. To meet that goal we are talking to all our national partners and I shall list our principles for the hon. Gentleman: sufficient education funding; increases for every LEA; the right balance between general grant and ring-fenced and targeted money; confidence that schools and pupils will receive the money intended for them; the right balance between in-school and out-of-school provision; fair and appropriate variations in the budget increases; and, work force reform in line with the national agreement.

11.30 am

Sitting suspended until Two o'clock.