§ The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland):My honourable friend the Minister for School Standards (Mr David Miliband) has made the following Written Ministerial Statement.
This statement relates to school funding in 2005–06.
In his Statement to the House on 29 October 2003 my right honourable friend the Secretary of State set out a package of measures designed to restore confidence in the school funding system and deliver stability in school budgets and predictability for head teachers and governors. These included a minimum increase in every school's budget; additional resources to help every LEA to support schools with additional pressures; the reversal of planned cuts in the Standards Fund; and targeted transitional support to help all schools to achieve balanced budgets. He explained that these arrangements would apply for the two years 2004–05 and 2005–06, but that the precise level at which the various elements would be set would be updated for 2005–06.
Evidence from LEAs' budget statements suggests that the measures put in place this year have been successful in restoring stability and predictability. In particular:
the vast majority of authorities have passported the increase in their schools formula spending share to schools in full;
overall, over two-thirds of schools received a funding increase above the level of the minimum guarantee. The remaining third received a funding increase in line with the minimum guarantee;
there is no significant difference in the number of schools receiving the guarantee by type of school (primary, secondary, special) or by size of school;
the guarantee has been helpful in giving schools earlier information about the minimum level of their budget to aid planning and to provide stability and predictability; and
the limit on central spend by LEAs has helped to maximise schools' own budgets, while allowing for special circumstances in some authorities.
We now need to look ahead to 2005–06. One of the things that authorities and schools have been telling us over the past year is that they would welcome earlier announcements from central government in order to enable them to plan ahead effectively. I am pleased 54WS therefore to be able to make this announcement over three months earlier than the equivalent announcement last year.
As in 2004–05, our starting point has been an analysis of the cost pressures which will face schools in 2005–06. My officials have discussed these cost pressures—including increases in teachers' pay and support staff pay and pensions—in detail with local government representatives and the head teacher associations. Excluding the costs of workforce reform, to which I will return, our best estimate is that cost pressures on the average school in 2005–06 will be in the range from 3.8 per cent to 4 per cent. There remain some uncertainties, in particular around the cost of local government pensions, which will impact unevenly on authorities.
We have also considered the costs of the implementation of the national agreement on workforce reform. Earlier in the year, with the support of our partners, we undertook a survey of schools in six LEAs to get a better understanding of their starting points, how they plan to deliver the workforce reforms and to what extent this can be achieved through the redeployment of existing resources. I am grateful to all those LEAs and schools for their help.
This work confirms that the pressures of workforce reform, and in particular guaranteed time for planning, preparation and assessment, will impact mainly on primary and nursery schools in 2005–06. The precise cost for individual schools will, of course, depend on the strategies chosen to implement the reforms and the amount of time that needs to be created, but we expect the average cost pressure to be between 0.8 and 1 per cent for primary and nursery schools. The survey also indicates that most secondary and special schools will be able to implement the September 2005 contractual changes from their existing resources. We recognise that some secondary and special schools may incur additional costs, and will undertake further work with our partners during the autumn term to examine the nature and extent of these costs, including in particular the transfer of exam invigilation from teachers. It will be for schools and LEAs to take forward the results of this work through workforce remodelling and through the headroom provided under the arrangements I am announcing today.
Of course, remodelling is not just about extra funding. We will continue to work with our partners, the National Remodelling Team and the network of LEA remodelling advisers and consultant leaders to offer guidance and support for all schools in implementing workforce reform. In particular, we will examine the support required by schools to manage effectively the transfer of exam invigilation from teachers from September 2005.
Our priority for 2004–05 and 2005–06 has been stability in school budgets, and in 2005–06 all schools will therefore continue to have a guaranteed minimum funding increase which is at least equal to the average cost pressures which schools are likely to face. However, I also believe that it is important to retain 55WS flexibility for LEAs to respond to local circumstances by directing additional resources where they are most needed, especially since the costs of workforce reform will vary significantly between schools depending on their starting point.
Against that background, I have decided that in 2005–06 the minimum guarantee should again be set at 4 per cent for secondary schools. As in 2004–05, this means that pupil-led elements of schools' budgets will increase by 4 per cent per pupil, and fixed elements by 4 per cent in cash. A secondary school whose pupil numbers stay the same between 2004–05 and 2005–06 will therefore be guaranteed at least a 4 per cent per pupil increase in its overall budget next year, on top of a minimum increase of 4 per cent this year. Secondary schools whose pupil numbers decline will receive an increase of more than 4 per cent per pupil, to help to cover their fixed costs. And those whose pupil numbers rise will receive at least a 4 per cent increase in their cash budgets, and an overall per pupil increase of at least 3.9 per cent.
For primary schools, I have decided that the minimum guarantee should be set higher, at 5 per cent, to take account of the additional costs which these schools face in implementing workforce reform. Primary schools whose pupil numbers remain unchanged will therefore receive at least a 5 per cent per pupil increase, and those with declining numbers will receive more than 5 per cent. Those with rising rolls will receive at least a 5 per cent cash increase in their budgets, and an overall per pupil increase of at least 4.9 per cent. As with 2004–05, special arrangements will apply to schools with 75 pupils or fewer.
The available evidence suggests that most special schools will be able to implement the national agreement on workforce reform at no net cost, though as I have mentioned we will do more work on this with our partners during the autumn term. Where costs arise they are likely to be very uneven across schools, and it is therefore more appropriate to deal with them by targeting LEA resources rather than through a higher minimum guarantee. The guarantee for special schools will therefore be set at 4 per cent for 2005–06. The special arrangements that applied to the calculation of the guarantee for special schools will continue in 2005–06.
Nursery schools received delegated budgets for the first time in 2004–05 and therefore no guarantee applied to them this year. We have agreed with our partners that the cost pressures on nursery schools are likely to be similar to those on primary schools in 2005–06 and therefore the guarantee will be set at 5 per cent for them. LEAs will be able to choose, in consultation with nursery schools, whether to operate the standard pupil-led form of the guarantee for nursery schools or a place-led version like that for special schools, depending on how their nursery schools are currently funded.
56WSAll of these figures are the minimum increase in funding which schools of each type will receive in 2005–06. As with 2004–05, we expect the majority of schools to receive an increase which is higher than the minimum guarantee.
Our work with LEAs on the cost of workforce reform also suggested that the costs of implementing the national agreement are likely to be highest for very small schools—those with under 100 pupils. The main reason for this is that it can be more difficult for a very small school to secure small proportions of support staff time in order to release teachers for planning, preparation and assessment time. In urban areas schools can collaborate to resolve these difficulties, but that can be harder to do in rural areas where travelling distances are greater. Subject to consultation, I therefore propose to apply a larger increase to the sparsity unit cost in the primary formula within the schools formula spending share, to direct more resources to authorities with a high proportion of schools in this situation. I am also doubling the announced increase in the school standards grant band for schools with under 100 pupils, to ensure that all small schools have some extra help with the costs of workforce reform.
In October the Secretary of State promised that the income schools receive from the school standards grant and the Standards Fund would be uprated in line with the minimum guarantee in both 2004–05 and 2005–06, and the Learning and Skills Council promised to do the same for school sixth form provision. I can confirm today that:
Standards Fund support for schools will be increase by 4 per cent in 2005–06. Detailed allocations will be announced in the autumn.
Schools will be entitled to either a 4 per cent per pupil increase in their school standards grant or their announced SSG band for 2005–06, whichever is higher; and
the Learning and Skills Council will increase all its funding rates for school sixth forms by 4 per cent in 2005–06.
Of course the minimum guarantee must be backed by adequate resources for LEAs. Next year we expect the average increase in the schools formula spending share to be around 7 per cent per pupil, and I intend to set the minimum increase which any authority can receive at 5.5 per cent per pupil. This is a minimum increase—the increase for most authorities will be higher. Setting the minimum increase at this level will again ensure that all authorities have some headroom after implementing the guarantee, to allow the local funding formula to operate or to direct additional resources where they are most needed. The provisional increase for each authority will be announced at the time of the local government settlement in the autumn.
Authorities where teachers are on the outer London teachers' pay scale face particular pressures in 2005–06 because the value of that scale will increase by a higher amount than the national average increase in teachers' pay as a result of the award for September 2005 following recommendations by the School Teachers' 57WS Review Body. The minimum increase in the schools Formula spending share will therefore be set at 5.8 per cent for these authorities. Again, increases for individual authorities will be announced in the autumn.
Next year the Government will again expect each authority to passport in full its SFSS increase into a matching increase in its schools budget, unless there are wholly exceptional circumstances.
As in 2004–05, we also expect LEA spending on their central education budgets to rise no faster than spending on schools next year. LEAs will again be able to seek an exemption where exceptional local circumstances arise—23 such exemptions were agreed this year. The view of the Schools Forum will again be important when any applications for exemptions are being considered.
In October the Secretary of State announced a package of transitional support which would he available to authorities to help schools experiencing particular financial difficulties to bring their budgets back into balance. The main element of that package was a targeted grant, totalling £120 million nationally, which went to the 51 authorities which would otherwise have had the lowest increases in revenue support for education between 2002–03 and 2004–05. The Secretary of State indicated in his October Statement that around half this amount would he available to the same authorities in 2005–06.
I can now confirm that the same 51 authorities will be eligible for exactly half of this year's allocation in 2005–06, subject to broadly the same conditions that applied this year. In particular, eligible authorities will need to update the transitional support plans which were agreed with my department earlier this year, to show how they will use the additional funds to target schools in the greatest difficulty and bring their budgets back into balance. I am placing a list of transitional grant allocations in the Library. No further transitional grant will be available from 2006–07.
58WSThis year we also amended the school funding regulations to give all local authorities the flexibility to target their own resources outside their school funding formula to support schools in financial difficulty. A number of authorities have made use of this flexibility in 2004–05 and we propose to continue it in 2005–06.
Finally, this year my department, working with the National College for School Leadership, KPMG and the head teacher associations, set up a programme of financial management training and support to help head teachers and governors to manage their budgets more effectively. This programme, which has focused in the first year on schools in authorities in receipt of transitional grant, has been very successful and received very positive feedback.
I am pleased to say that the programme will continue into the coming academic year, and will be expanded to cover schools across the country. Workshops will be available for up to 10,000 schools, and will be based on a menu of options from which LEAs and schools can draw. In particular, workshops will be available to support schools with the financial management aspects of workforce reform, and of falling rolls. Follow-up consultancy will be available for schools that need additional support over and above the workshops, and financial management master classes will be held for LEA staff. The financial management in schools website will also be maintained and enhanced.
The decisions I have outlined today will continue the successful arrangements which have been introduced this year and ensure that the stability and predictability that has been restored to school funding will continue in 2005–06. However, I have always been clear that these arrangements were a short-term measure. The dedicated schools grant that the Government have announced for 2006–07 and beyond, together with guaranteed three-year budgets for schools, will give head teachers and governors unprecedented financial security and confidence, and the ability to plan for the future. The arrangements for 2005–06 that I have announced today will provide an effective bridge to those longer-term arrangements.