National Funding Formula
and High Needs Funding
from 2017/18
Julie Cordiner
Education Funding Specialist
13th April 2016
Agenda
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Consultation process
Case for change and principles
Structure of DSG
Schools Block formula
Transition to the new system
Central Schools Block and Education Services
Grant
• High Needs funding arrangements and formula
• Individual formula factors in NFF
Fairer funding: consultation
2 stage consultation:
• Stage 1: a vision for the future funding system as a
whole and the principles that underpin it
- the design of the system
- the role of the local authority
- the factors to include for each block
• Stage 2: detailed proposals for factor weightings, speed
of transition (protection and capping) and the impact of
the new formulae on local authorities and schools
Stage 1 consultation now open, to 17 April
Early Years consultation to follow later this year
Fairer funding – the case for change
Funding for local authorities is based largely on historic allocations from a
decade ago and no longer matches need
School funding per pupil compared to pupil characteristics
Fairer funding – the case for change
Funding for high needs does not correlate well to need
The range of allocations per head
Principles
A funding system for schools and high needs that:
• Supports opportunity - for all pupils to achieve their potential
• Is fair - allocates funding to schools/LAs on the basis of
objective measures of needs and characteristics of pupils
• Is efficient - supports efficiency within schools and LAs
• Gets funding straight to the frontline - maximises the resources
available for teaching and learning and achieve value for money
• Is transparent - easily understood and justified
• Is simple - should rationalise funding streams as far as possible
• Is predictable
Question 1: Do you agree with our proposed
principles for the funding system?
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Will agreement with principles imply consent for overall
centralising of the school funding system?
There are tensions between principles – e.g. a fair
formula may not be simple or predictable
A system that takes money from some schools to give
to others is not likely to be regarded as fair, especially
given cost pressures – DfE needs to provide funding
Ability of MATs to redistribute funding between their
academies will frustrate the aims of the NFF
Structure of Dedicated Schools Grant
Proposed blocks from 2017/18:
Schools
Early
Years
High
Needs
Central
Schools
All to be allocated by formula to schools and LAs
Baselining exercise March/April to define current LA spend
on blocks rather than allocations.
This will be used as the basis for protection elements.
Schools Block formula
• A single, national formula from 2017/18 - notional
allocations for every individual school, plus LA
funding for premises-related costs and growth
• For 2017/18 and 2018/19, this will be aggregated to
LA level to form a ring fenced Schools Block
allocation, and LAs will distribute the total to schools
through a local formula (‘soft’ formula)
• From 2019-20 DfE will fund schools directly (‘hard’
formula) – no local formula from April 2019
• Review of Schools Forum role during this time
• Not saying all schools will be on the formula in 2
years – ‘will be done in a manageable way’
Question 2: Do you agree with our proposal to move to a
school-level national funding formula in 2019-20, removing
the requirement for local authorities to set a local formula?
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Do the principles require a centralised system?
Can a national formula reflect local priorities ?
Conflict with localism policy
Allows government to change weightings/values at
will, so could be unpredictable results year on year
• Still won’t achieve parity because of MAT redistribution
• Suggestions for a different system? Local formula
within set parameters and a less turbulent redistribution?
Formula factors in the NFF
Newcastle funding vs. national
Proportion of total ISB before MFG
Newcastle National
Basic entitlement 68.4%
76.2%
Deprivation
12.5%
8.1%
LAC
0.1%
0.1%
EAL
1.3%
0.8%
Pupil mobility
0.3%
0.1%
Prior attainment
8.4%
4.4%
Lump sum
6.5%
8.3%
Rates
1.0%
1.2%
PFI
1.6%
0.4%
Transition to the reformed system – three aspects
1. Role of LAs in period before the ‘hard’ NFF
• LAs must pass the total Schools Block amount to
schools and cannot transfer any to other blocks
• Can use a local formula to distribute this amount
between schools – e.g. to reflect actual costs for items
funded on historic bases (PFI, rates, growth etc)
• Can set a worse MFG than the national minimum %
loss per pupil if they have insufficient funding to
balance the formula.
Question 20: Do you agree with our proposal to
require LAs to distribute all of their schools block
allocation to schools from 2017/18?
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Understand this is the only way to achieve parity
across local areas, but it conflicts with localism policy
Removes local flexibility which currently supports LA
statutory duty to ensure provision for pupils with
SEND, causing problems if pressures are unfunded
Assumption that managing high needs cost pressures
can be done through collaboration and reshaping
provision does not recognise increase in demand
Question 21: Do you believe that it would be
helpful for local areas to have flexibility to set a
local minimum funding guarantee?
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Use of historic spend for PFI, rates and growth is
expected to cause problems in keeping to allocation
when LAs try to distribute it in line with updated need
Need early notification of school-level allocations, to
avoid abortive work on a local formula
LAs need sufficient funding to manage reasonable
variations to reflect localised need e.g. mobility
Imposing a faster reduction on some schools to make
the local formula affordable is not helpful
Transition to the reformed system – three aspects
2. Approach to phasing in gains and losses for schools
Starting point
MFG or capping
Pure formula
--------- Time taken according to what is ‘manageable’ ---------• Unclear how extra £500m allocated in budget will be
applied – probably to let gains flow through rather than
lessen or slow down reductions
• Will remove de-delegation – individual schools will decide
whether to buy services
Transition to the reformed system – three aspects
3. Supporting schools to be more efficient
• ‘Schools that lose funding will need to plan budgets
over medium to long term and take decisions to
reduce their spending in ways that continue to
support pupil outcomes’
School financial
health &
efficiency tools
Invest to Save
Fund 2016/17
Any questions or comments on
Schools Block proposals?
Central Schools Block
Central budgets
currently in
Schools Block
+
£15 per pupil LA
Education Services
Grant (services for
schools &
academies)
• All to be distributed on per pupil basis – distribution will
change
• LAs should not be top-slicing school budgets for functions
that should be provided from LA core budget or where
costs have unwound (end of contracts)
• Historic commitments to be funded only on evidence
Question 22: Do you agree that we should fund
LAs’ ongoing responsibilities as set out in the
consultation according to a per-pupil formula?
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Potential for disruption to services agreed with
Schools Forum – central retention is simple
Per pupil basis will not reflect local need to spend
Admissions will be a particular problem – in-year
admissions vary significantly
Moving ESG statutory duties into DSG removes local
discretion to organise services in best way for the area
and makes them reliant on what DfE will fund
Question 23: Do you agree we should fund LAs’
ongoing historic commitments based on casespecific information to be collected from LAs?
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Reasonable, but need clear timescales where cases
are refused to allow LAs to plan for redundancies
How will LAs pay for redundancies?
As expenditure reduces, the plan to move it into
Schools Block will mean the money won’t stay with the
same LA but be redistributed as in the main formula.
The future of Education Services Grant
• Reducing from £800m to £200m – in 2016/17 saved
£72m with reduction from £87 to £77 per pupil
• Can’t achieve rest by efficiencies alone, so need to
remove some LA duties – asking for views on which
• LAs will have 3 main education functions in future:
• Securing sufficient school places
• Ensuring the needs of vulnerable pupils are met
• Acting as champions for all parents and families
• Will allow LAs to retain some of their schools’ DSG to
cover statutory duties performed for them
• Academy protection to 2020 but LA ESG cut from
summer 2017
Question 24: Are there other duties funded from the
education services grant that could be removed from
the system?
• Funding should not be removed until it is clear what
changes to statutory duties are being made
• Cost drivers often don’t relate to pupil numbers
Question 25: Do you agree with our proposal to allow
LAs to retain some of their maintained schools’ DSG
centrally – in agreement with the schools forum – to
fund the duties they carry out for maintained schools?
• It is unclear what would happen if this is not agreed
by the Schools Forum, where the duty is statutory
Any questions or comments
on Central Schools Block
proposals?
High Needs Funding
• There is considerable variation in the cost of SEN
provision in different LAs
• Isos asked 12 LAs to describe the special educational
provision they would offer (and the costs they would
expect to pay) in a series of hypothetical examples
• E.g. a Year 4 child with autism, severe learning
difficulty and challenging behaviour
• All 12 LAs said he would be placed in a special school
• The top-up funding that the school would receive
ranged from £2,000 to £25,000
High Needs Funding
• Will continue to be allocated to local authorities
• Based on a new national formula
• Includes element of 2016/17 spending to protect
existing pupils and provision
• Area cost adjustment will be applied to total as in NFF
• A Minimum Funding Guarantee will be applied to the
block to limit year-on-year reductions for any LA
• Hospital Education funding to continue as now while a
review is undertaken of inpatient data availability
• Alternative Provision will have a separate formula
based on population and deprivation
High Needs Block Formula
High Needs Block Formula
£4k instead
of £10k –
rest from
other factors
‘Substantial’?
Not
EYFS
Same issues
as NFF –
UIFSM and
IDACI
updates
High Needs Questions… 1
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Question 1: Do you agree with our proposed principles for
the funding system?
Question 2: Do you agree that the majority of high needs
funding should be distributed to local authorities rather than
directly to schools and other institutions?
Question 3: Do you agree that the high needs formula
should be based on proxy measures of need, not the
assessed needs of children and young people?
Question 4: Do you agree with the basic factors proposed
for a new high needs formula to distribute funding to local
authorities?
High Needs Questions… 2
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Question 5: We are not proposing to make any changes to
the distribution of funding for hospital education, but
welcome views as we continue working with
representatives of this sector on the way forward.
Question 6: Which methodology for the area cost
adjustment do you support?
Question 7: Do you agree that we should include a
proportion of 2016-17 spending in the formula allocations of
funding for high needs?
Question 8: Do you agree with our proposal to protect local
authorities’ high needs funding through an overall minimum
funding guarantee?
Funding for specialist provision
• Special schools still funded at £10k place-led plus top
up payments for pupils on roll
• Mainstream schools with ARCs/ARPs will receive
basic entitlement (AWPU) funding for pupils in bases
and £6k per place (plus top ups)
• LAs can still fund empty places
• Independent special schools will be allowed to opt in
to the Place Plus system and receive £10k per place
from EFA
• Changes to FE post-16 to move £6k (el 2) into post16 funding formula – to be consistent with schools
High Needs Questions… 3
• Question 9: Given the importance of schools’
decisions about what kind of support is most
appropriate for their pupils with SEN, working in
partnership with parents, we welcome views on what
should be covered in any national guidelines on what
schools offer for their pupils with SEN and disabilities.
• Question 10: We are proposing that mainstream
schools with special units receive per pupil amounts
based on a pupil count that includes pupils in the
units, plus funding of £6,000 for each of the places in
the unit; rather than £10,000 per place. Do you agree
with the proposed change to the funding of special
units in mainstream schools?
High Needs Questions… 4
• Question 13: Do you agree that independent special
schools should be given the opportunity to receive
place funding directly from the EFA with the balance in
the form of top-up funding from local authorities?
• Question 14: We welcome views on the outline and
principles of the proposed changes to post-16 place
funding (noting that the intended approach for post-16
mainstream institutions which have smaller
proportions or numbers of students with high needs
differs from the approach for those with larger
proportions or numbers), and on how specialist
provision in FE colleges might be identified and
designated.
Any questions or comments
on High Needs Block
proposals?
Conclusions
• Limited window suggests Stage 2 already written
– but at what level of detail?
• Significant risks to Newcastle schools
• Loss of local discretion and Schools Forum
powers
• Need to prepare – schools to begin strategic
financial planning based on assumptions
• Prudent approach for 2016/17 – continue High
Needs Budget review to try to find savings
• Applications for licensed deficits?
Break - before considering
detailed Schools Block factors
Schools Block formula details
Question 3: Do you agree that the basic amount
of funding for each pupil should be different at
primary, key stage 3 and key stage 4?
• Logical to keep the current arrangement
• Key issue is the value for each phase, considering the very
wide range of ratios across the country.
• Newcastle values/position in 2015/16 (latest data):
Newcastle
National
median
Rank
Min
Max
Primary
2,605.85
2,899.72
141
2,321.82
6,000.00
KS3
3,876.60
4,008.14
100
3,000.00
7,754.50
KS4
4,424.36
4,516.74
99
3,000.00
10,975.70
• Newcastle AWPU 68.4% of total, national 76.2% pre MFG
Socio-economic deprivation
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Ever 6 FSM from January census: income deprivation
Single FSM from October census: cost of free meals
IDACI October census pupils to capture additional
disadvantage from living in deprived area – DfE may
adjust bandings to manage updates
New income threshold when Universal Credit
introduced, to enable FSM eligibility to be defined
Pupil Premium to be kept separate
Question 4: a) Do you agree that we should
include a deprivation factor?
• Deprivation is a strong proxy for barriers to education;
exclusion could affect disadvantaged groups
• Need some assurance that Pupil Premium will still be
regarded as additionality – risk of diluting formula factor
• Newcastle deprivation 12.52% of total, national 8.08%
Newcastle
National
median
Rank
Min
Max
FSM Prim
1,262.49
821.94
36
Nil
5,093.57
FSM Sec
1,382.63
1,013.66
51
Nil
3,588.05
Question 4: b) Which measures for the
deprivation factor do you support?
- pupil level only (current FSM/Ever 6 FSM)
- area-level only (IDACI)
- pupil and area level
• FSM simple to operate and strong correlation with
disadvantage – but need to address Universal Infant
FSM impact on data collection
• Need more information on income threshold within
Universal Credit and what the impact will be
• IDACI – loss of confidence after turbulence from 2015
update. Why couldn’t bandings be adjusted then?
Low prior attainment
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Primary: use EYFSP expected level of
development until non-statutory from Sept 2016
Then reception baseline assessment but will keep
under review and publish proposals
Secondary: to use new expected KS2 standard but
will set out proposals once established
Notional SEN budget - will keep for now but consult
on how best to help schools decide how much to
spend on SEN support
Question 5: Do you agree we should include a
low prior attainment factor?
• Varying profiles of pupil prior attainment – some need
more personalised support which has a financial cost
• Risk of volatility when indicators change – how will this
be handled?
• If more pupils do not achieve new expected KS2
standard will funding be increased? Or will the rate per
eligible pupil? Either will affect the distribution of funding.
• LAs are used to of trading off one change against others,
but it is quite a different matter to do this nationally.
English as an Additional Language
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Overall attainment of EAL pupils by end of KS4 is
broadly in line with non-EAL, but recognise short
term barriers to accessing education
Initially will use EAL status in October census for
maximum of 3 years.
Concerns it does not accurately reflect lack of
fluency in English or other languages.
DfE is considering robustness of data and scope to
target funding more effectively by gathering data on
English language proficiency of EAL pupils
Question 6: Do you agree we should include a
factor for English as an Additional Language?
• EAL does need extra support, especially when entering
at other than normal admission times
Question 6b) Do you agree that we should use
the EAL3 indicator (pupils registered at any
point during the previous 3 years as having
English as an additional language)?
• Yes, but consider counting 3 years differently so schools
do not lose funding for a break in registration when pupils
leave the UK then return again. Is 3 years enough?
Lump sum
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No clear trends in size of lump sum compared to
average school size in an LA – very variable
Recognise small schools need a lump sum
Question 7: Do you agree that we should
include a lump sum factor?
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Needed but decision on value will be difficult and
could cause significant volatility
Average size of school not a valid indicator of level
needed, as mix of schools can differ between LAs
Sparsity
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If small rural schools closed, pupils would have to
travel a long way to the nearest alternative school
Based on travel distance to second nearest school
and average number of pupils in each year group,
with a taper to prevent a cliff edge
Question 7: Do you agree that we should
include a sparsity factor?
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Unsure – less funding in this factor than pupil
mobility, and it depends on size of lump sum
Business rates
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Wide range of costs, not controllable by schools so
a per-pupil formula is not appropriate
LAs can continue to fund on basis of actual charge
Question 9: Do you agree that we should
include a business rates factor?
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Yes but schools must be funded at actual cost, not
a fixed historic amount – new build and expanding
schools experience increases
Changes to academy status will reduce costs
Split sites
• Compensation for extra costs incurred in having more
than one site
• Not recognising costs would have a significant impact on
resources available for teaching and learning
• Propose to allocate on historic spend 2017/18 & 2018/19
Question 10: Do you agree that we should
include a split sites factor?
• Unsure – Costs do not sound significant enough,
considering that pupil mobility is not being included.
Private Finance Initiative
• PFI schools tied into long contractual arrangements
• Allocating on basis of historic spend in 2017/18 and
2018/19 would allow LAs to reflect any changes in schoollevel funding in distribution of top up funding for PFI costs
• Will consider moving to a more formulaic distribution of
funding from 2019/20
Question 11: Do you agree that we should
include a private finance initiative factor?
• Yes, but funding allocated to LAs needs to take into
account not only historic costs but also inflationary
increases built into contracts
Exceptional premises circumstances
• Only affects 462 schools – e.g. rent for buildings or sports
facilities
• Only approved if >1% of school’s funding and affects less
than 5% of schools in the LA
• To allocate on basis of historic spend, but extra funding
required may change with NFF
Question 12: Do you agree that we should include
an exceptional premises circumstances factor?
• Unsure – how much choice do schools have? Costs do not
sound significant enough, considering that pupil mobility,
which affects many more schools, is not being included.
Question 13: Do you agree that we should allocate
funding to LAs in 2017/18 and 2018/19 based on
historic spend for these factors?
• Business rates
• Split sites
• Private finance initiatives
• Other exceptional circumstances
• Does ‘historic spend’ mean a freeze on what is spent in
2016/17? Would not reflect actual costs.
• Or lagged funding based on actual spend in each year?
Would involve a delay but at least increase would be
provided and it would be predictable.
Growth
• Need to respond to significant in-year pupil growth which
is not recognised by the lagged funding system (census)
• Includes temporary falling rolls funds
• Would allocate total of previous year’s spend
• Still able to carry forward growth funding
• But recognise it is not perfect – assumes future growth
follows same pattern as historic growth
• Want to find a way of targeting funding that better reflects
growth from 2019/20, taking into account interaction with
basic need and estimates of growth in individual schools
Question 14: Do you agree that we should
include a growth factor?
• Yes – otherwise schools that are willing to take extra
pupils to help the LA discharge its statutory duty would be
penalised financially.
Question 15: Do you agree that we should allocate
funding for growth to LAs in 2017/18 and 2018/19
based on historic spend?
• The need for growth funding is not constant; static cash or
lagged allocations will not work.
• SCAP returns and LA data on pupil projections at a more
detailed level should be used to agree allocations.
• A formulaic approach will not work.
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Area Cost Adjustment
• Consulting on use of general labour market measure or
hybrid measure separating teaching and non-teaching costs
• It won’t apply to factors based on historic spending
Question 16: a) Do you agree that we should include
an area cost adjustment?
b) Which methodology for the ACA do you support?
General labour market or hybrid methodology?
• Concerned at the weighting that will be given to this factor
• Needs review to ensure it accurately reflects additional
costs given that other schools will lose funding
• Support hybrid as a more accurate methodology
Omitted factor: Looked After Children
• Wide variation in rates per LAC in funding formulae
• To transfer funding to LAC Pupil Premium for extra visibility
Question 17: Do you agree that we should target
support for LAC and those who have left care
through the pupil premium plus, rather than include
a LAC factor in the NFF?
• Seems sensible but whether in PP or NFF, will create
turbulence by introducing one national rate per LAC
• If not in NFF, losses will not be protected in MFG.
Omitted factor: Pupil Mobility
• Currently applies to schools with over 10% entering outside
normal times of year; 65 LAs with £24m in total
• Felt not to be significant enough and other factors will
provide funding for these pupils (deprivation/EAL/low prior
attainment)
Question 18: Do you agree that we should not
include a factor for mobility?
• Strongly disagree – higher than sparsity & others included
and migration/in-year admissions increasing (Syria etc)
• A school with high mobility has higher costs than another
with same profile but stable rolls.
• Risk of schools refusing to admit in-year if not funded?
Omitted factor: Post 16
• Legacy factor – only £16m allocated currently, propose to
cease it and put the funding into the NFF
• Will be part of baseline for MFG for those receiving it now.
• Not relevant to Newcastle
Question 19: Do you agree that we should remove
the post-16 factor from 2017/18?
• Yes – it is not a significant sum and relates to a previous
system where LAs could choose to top up LSC funding.
• Where it contributes to an overall loss for a school greater
than the MFG level, there will be some protection.
National Funding Formula
and High Needs Funding
from 2017/18
Julie Cordiner
Education Funding Specialist
13th April 2016