Wednesday, October 20th

So the funding situation for schools is getting a little clearer, after George Osborne’s spending review announcements today. There is still some way to go, though.

Here are a few thoughts.

First, although the funding situation for schools appears at first glance better than many were predicting – and certainly appears better than that facing universities and further education, there are several caveats.

For, although Mr Osborne was able to say that the schools budget for 5- to 16-year-olds would rise in real terms every year for the next four years, this relates to only to a 0.1 per cent real terms increase per year. But more significantly, perhaps, the spending review documents make clear that “underlying per pupil funding will be maintained in cash terms”.

In other words, although the amount of money going into the overall pot, the Government says, will rise just a bit more than it needs to do to keep pace with inflation, funding per pupil is actually going to fall, after taking into account inflation, presumably because pupil numbers are increasing.

The Government might retort here that teachers’ pay – the major element of schools’ budgets, at around 80 per cent – is being frozen over the next two years, so a big part of costs will not increase over that time. But that still leaves the 20 per cent.

But returning to that overall pot, the fact that it will keep pace with inflation at all is in part because the pupil premium, at £2.5 billion, has been factored in to the total.

This, I think is very interesting, as it shows that the pupil premium is not just an addition to the schools budget, as it could have been.

In the Institute for Fiscal Studies policy paper from March, which I reported on in my first blog on the pupil premium, the first scenario modelled was one where the pupil premium was simply added on to existing schools budgets.

The IFS modelled what would happen under this scenario, which would mean that no school would lose out from the advent of the premium, and many schools would gain. This model, it said, was based on a 2009 policy paper from the Liberal Democrats which proposed a pupil premium which would “involve extra money for schools”.

I cannot see how this scenario survives under what has been proposed today, since it would seem to imply preserving baseline real terms funding to schools before the pupil premium is added. But the pupil premium is being added only to bring funding up to real terms parity.

Because the overall 5-16 schools budget is being held roughly equal, in real terms, then, even after taking into account the pupil premium, there are going to be winners and there are going to be losers from this settlement. In fact, given that per-pupil funding is only being held constant, in cash terms, it may be hard to find many schools whose budgets are going to go up, in real terms, as a result of this settlement.

And what will be the effect of the premium itself? Well, it seems to me there are only two scenarios, here.

Because the schools budget is to increase only roughly at the pace of inflation, this is a “standstill” budget, in real terms. If the effect of the pupil premium is to direct more money towards pupils from disadvantaged backgrounds, this must come at the expense of non-disadvantaged homes (ie they will lose out, in real terms, because the pot is not large enough to ensure that no-one loses).

On the other hand, as the Institute for Fiscal Studies argues in its March pamphlet, in reality in recent years there has already a large amount of money going to schools educating disadvantaged pupils (through an implicit pupil premium). Given this, it may be that the pupil premium does not end up directing more money to disadvantaged pupils, on average, than was already the case under Labour. In that case, non-disadvantaged pupils would not lose out but it would hard to see how the politicians could claim the pupil premium had really gone a long way towards tackling disadvantage.

There is still much detail to work out, including how direct grants to schools are allocated. These are significant because, according to the IFS, they accounted for 15 per cent of primary school funding, and 16 per cent of secondary school funding, in 2008-9.The Government has said it will take grants including the Schools Standards Grant, specialist schools funding and money for one-to-one tuition, into account when calculating schools’ budgets, implying that these grants are going to be maintained but with “ringfencing” removed so that heads can decide how they want to spend the money.

However, does this mean that each school receives the same amount of grant as they did in the past, or simply that the money goes into a general national pot to be redistributed?

The other thing that has not been factored into any of this, I believe, is the effect of any cuts in local authority support services, which will have an impact in schools.

Despite this lack of detail, if I were a betting man, I would wager that schools in relatively well-off areas with large numbers of disadvantaged pupils would emerge as the relative winners from this settlement, and those educating lots of disadvantaged pupils in poorer areas as relative losers.

I’ve got a couple of reasons for believing this. First, the Government’s consultation on the pupil premium, published over the summer and discussed in my last blog, does not envisage the pupil premium being a single figure per disadvantaged pupil for the whole country. Rather, schools educating disadvantaged pupils in relatively poorly funded areas (which tend to be outside the poorest inner cities) will get a higher pupil premium, and those in well-funded areas, a lower. The effect of this, I think, will be to redistribute funding towards schools in less disadvantaged, rural areas, as the IFS paper from earlier this month suggests.

The Liberal Democrats, in their pupil premium paper from last year, say that funding for disadvantage is not “targeted” effectively enough at the moment, with schools in different parts of the country funded very differently (up to £1,000 per pupil) even when they have “very similar levels of need”. It implies that Labour grants targeted at areas of deprivation, rather than particular pupils, miss out on supporting many disadvantaged children. Expect redistribution to reflect this, then.

The other reason to believe that the change could work this way is pure politics. Unsurprisingly, figures for children eligible for free school meals tend to show that more are concentrated in Labour-supporting areas. In a tight budget overall, the coalition would be brave to allow the pupil premium to move funds for deprivation further towards Labour-supporting areas, at the expense of schools in areas which have Liberal Democrat or Conservative MPs. Political realism would suggest the formula has not been engineered to make this happen. Perhaps the politicians will be bold enough to allow schools in “their own” areas to take the hit for this new funding system. But, as I say, I think it would be a brave person who bets on it.


  1. I work for FE – we get a 25% cut by 2014. All I teach is A level but Govt doesn’t seem to know that They think we teach adult hobbies. Hey ho!

  2. With regard to the implicit pupil premium, the biggest problem has been its either/or nature – either schools are deemed to be sufficiently disadvantaged to receive it or they’re not. This meant that many ‘borderline’ schools missed out, even if their intake was anything but middle-class.

    A consistently-applied national formula for the pupil premium would solve this problem, but it’s hard to see how far towards this model the coalition is willing to go.

  3. Thanks for the comments. Tom, like you I will be watching out for the detail to see how any redistributive effects work.

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