The pupil premium – part 1

Monday, October 18th, 2010

With Wednesday’s Comprehensive Spending Review due to include an announcement on the new “Pupil Premium”, I thought I’d post here a piece I wrote on this shortly after the general election in May. It is based on an impressively detailed paper on the Pupil Premium by the Institute for Fiscal Studies. I originally wrote it for Education Journal, for whom I write a monthly article.

I intend to do another blog – possibly shorter! – by tomorrow updating the position on the pupil premium based on what has been announced since May.

My Education Journal piece follows below:

It was reportedly one of the key points of convergence between the Conservatives and the Liberal Democrats during their negotiations over the formation of the new government.

Accordingly, it was one of only five education policies mentioned in the “coalition agreement” signed between those parties and published during one of the most momentous weeks in British politics for many years.

But what exactly is the “pupil premium”? And will its introduction, advocated for at least two years now by both of the former opposition parties, really bring about the transformation in funding and achievement among poorer pupils that they hope?

For all the warm feelings and positive sentiment that this policy would appear to generate, I am not sure that its introduction will be quite as unproblematic as those backing it might hope.

The concept behind the pupil premium is relatively simple. During the calculation of schools’ budgets, children from poorer backgrounds are allocated extra funding, compared to those from better-off homes. This allocation then follows the child to whichever school they attend. So a school with many disadvantaged pupils will be better funded than one educating primarily better-off children.

The motivation for introducing it is also clear. All parties want to address the achievement gap between children from poorer homes and the rest. The presence of this chasm is constantly underlined through research, with children eligible for free school meals – to choose the most commonly-used measure of deprivation – well behind their peers from wealthier families, on average, on any metric of achievement.

Although both back it, the two coalition parties have come at the pupil premium from slightly different perspectives. This, at least, is the view of an impressively analytical recent report published in the spring by the Institute for Fiscal Studies.

For the Liberal Democrats, the idea is that targeting extra money at disadvantaged children will have a direct reward: with more investment, it would be expected that their education improves and, by extension, that their academic results also rise.

Perhaps unsurprisingly, the Conservatives see the premium more in terms of its effect on the “market” of school places. With poorer children attracting more cash, schools will have an incentive to chase their “business”, and thus any tendency in the current system to incentivise schools not to take on poor – or what could be seen as harder-to-educate – children could be negated.

So where are the difficulties? Well, I think there are potentially many.

Most fundamentally, to hear the way this policy is put across, one might expect that poorer children have actually been getting a very raw deal, in terms of funding, under the arrangements which have operated under Labour. But this really does not seem to be the case. The IFS paper makes clear that poorer pupils are already well-supported financially, relative to others within the state system, and that the money allocated to those eligible for free school meals (FSM) in particular has increased dramatically in recent years.

 The IFS statisticians looked at the data on funding for each school in England. School budgets consist of a core element, received from local authorities. This is then topped up by specific grants to schools from central government. The statisticians then looked at the number of pupils eligible for free school meals in each school. They found that schools with many FSM pupils were much better off, all other things being equal, than those without them.

There was, then, extra cash, or an implicit premium, for schools educating FSM pupils, even though this was not spelt out nationally through a particular formula. This was in part because of the increasing amount of direct funding targeted at schools serving disadvantaged areas.

The IFS paper then works out that, on average, in 2008-9 this premium amounted to £2,460 for each primary FSM pupil, and £3,370 for each secondary FSM pupil. In other words, in practice these children have been bringing a great deal of extra cash for their schools.

By comparison, average total per-pupil funding overall equates to £5,580 for 2010-11 in the IFS paper.

Moreover, the current implicit premium given to FSM pupils has been growing sharply in recent years, rising in real terms by 69 per cent in primary schools and 53 per cent in secondaries over only four years, the paper says, compared to only 17 per cent for the overall real terms growth in spending for all pupils since 2006.

The upshot, then, is that any new pupil premium giving “extra” money to children from disadvantaged homes does not start from a neutral position, in which the poorest children are now funded only on a par with the richest within the state system. There already is extra funding, and the new system will have to do better than this if it is to achieve its aim of further redistributing cash.

This, then, is the crux. Will the overall effect of the pupil premium be to add to the amount directed at disadvantaged pupils? Or will it leave things broadly unchanged, or even take money away?

The answer may depend on whether the new government adopts the Liberal Democrat proposal to fund the premium with an extra £2.5 billion taken from outside the schools budget, or goes with Conservative plans, which have not so far set out how the premium is to be funded. At the time of writing, all that was being made public about the government’s plans was a statement in the coalition agreement which said: “We will fund a significant premium for disadvantaged pupils from outside the schools budget by reductions in spending elsewhere”.

So extra money is to be found. But how much?

The Liberal Democrats were upfront before the election with their proposed £2.5 billion figure, funded in part by cutting tax credits to families with above-average incomes. The IFS paper models how injecting this amount of extra cash, on top of all current spending, might affect schools’ budgets if it were targeted at disadvantaged children. The effects could be dramatic, one in five secondary schools and one in three primaries receiving a rise in their budgets of at least 10 per cent as a result.

Crucially, because the cash would simply come on top of all existing spending programmes, no school would be worse off. However, this is not the only model set out by the paper. There would be two other options for an incoming government, it said.

First, it could fund the pupil premium partially by scrapping existing direct grants which the government now makes to schools, which include cash targeted specifically at those serving disadvantaged areas.

Second, it could overhaul the entire funding system, changing today’s arrangements whereby the cash for schools’ core budgets goes from central to local government, with councils free to supplement this before passing the money on to schools. Instead, a national funding formula would be introduced, with all schools receiving a set amount for each pupil they educate directly from the government, with an extra figure allocated for disadvantaged children.

Unsurprisingly, these latter two models produce less clear gains for schools educating disadvantaged pupils. Under the first option, which would scrap the government grants, up to 70 per cent of primary schools and 67 per cent of secondaries would either be worse off or broadly unchanged. The other option, the new national funding formula, would again produce winners and losers, with around half of schools gaining cash and half losing it.

And, amazingly in one version of this change modelled by the IFS, among the losers would be the 10 per cent of secondary schools which have the highest number of deprived pupils. For them, the introduction of the national funding formula, with its explicit premium for disadvantaged children, would not compensate for the loss of direct grants they currently receive from Whitehall for tackling disadvantage, all of which would go to pay for it.

The key in all of this, then, both politically and in terms of its effects on individual schools, will be how many of Labour’s existing programmes to tackle deprivation get retained, if any, and, of course, how much extra cash overall is devoted to the pupil premium.

There are reasons to fear for existing direct funding in particular.

First, it seems unlikely that the new government will want to keep all of Labour’s central funding programme for schools, simply because it will have its own priorities.

Second, a 2008 paper from Policy Exchange, the think tank with close links to the Conservartives, proposes paying for a national funding formula for schools by scrapping Labour schemes including the standards fund, education maintenance allowances and the National Challenge, which targets schools with low results.

As ever, the devil as to whether this policy actually does achieve its ambitious goal of improving the lot of disadvantaged pupils will be in the detail of how it works. And there is an awful lot of detail.

The IFS paper, “Pupil Premium: Assessing the Options”, can be viewed at: www.ifs.org.uk/publications/4775

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