School Finance (England) Regulations 2006

rose to move, That the draft regulations laid before the House on 19 January be approved [15th Report from the Joint Committeeand 22nd Report from the Merits Committee]. The noble Lord said: My Lords, the draft regulations support the new funding arrangements for schools that we will introduce from April 2006, which demonstrate the continuing high priority that the Government give to schools. By 2007–08, total revenue funding per pupil will have increased nationally by more than £1,400 in real terms since the Government came to power—an increase of some 50 per cent. In the Statement which my right honourable friend the Minister of State for School Standards made in December she announced details of the funding settlement for schools and local authorities for the next two financial years—from April this year to March 2008. The new arrangements set out in these regulations will provide for three important changes: first, a ring-fenced dedicated schools grant so that the funding intended for education is ring-fenced for that purpose alone within local authority budgets; secondly, multi-year budgets for schools so that they get the full benefit of the multi-year pre-announcement of funding that we made in December; and thirdly, a rationalisation of standards-related grants so that there is less central prescription on how standards funding is spent at school level. In making provision for those three worthwhile changes we are striking the right balance between national prescription and local flexibility. To achieve the dedicated schools grants, the regulations define two separate budgets—the LEA budget and the schools budget. The LEA budget must include the expenditure on the strategic functions of a local education authority, whereas the schools budget can include only expenditure on provision for schools and pupils. Under the new arrangements the whole of a local authority’s dedicated schools grant must be applied to its schools budget. That is the key to ensuring that funding intended for schools actually reaches them. The vast majority of the budget must be distributed in the form of budget shares for individual schools. However, a local authority may retain necessary expenditure for other key educational functions, including certain types of school support services, nursery education provided outside maintained schools, and support for pupils who cannot be educated in maintained schools. As well as placing restrictions on the type of expenditure for which a local authority may retain money from its schools budget, the regulations limit the amount that can be retained. The regulations also describe how local authorities must allocate funding to individual schools. They contain a mixture of central prescription and local discretion, which will be familiar to local authorities and schools in most respects. For example, the minimum funding guarantee, which guarantees every school an annual per pupil increase in funding to meet cost pressures, remains a central feature of these regulations. The minimum funding guarantee is an important safeguard for schools, is strongly supported in the schools community and supports the principles of stability and certainty that underpin the new arrangements at large. There are two new provisions in the regulations. The first relates to the important matter of the relationship between the number of pupils in a school and its budget share. Local authorities can currently use a variety of methods to count pupils for the purpose of setting a school’s budget. Such methods often lead to changes in school budgets part way through a year. We know from school representatives that this can be disruptive and create an unnecessary administrative burden. If their budget changes halfway through the year, that of course does not help schools to plan ahead effectively. Under the regulations, every school’s budget will be based on the number of pupils on its roll in the January before the financial year to be funded. This change will provide greater stability, as the largest element of a school’s budget will not alter during the course of the year. The second new aspect of the regulations relates to the role of schools forums. Three years ago, all local authorities were required to establish schools forums. Until now, such forums have been purely consultative. They retain that important role, but the regulations now give them limited powers to approve local authority proposals to vary some aspects of the regulations. Regulations cannot account for every local circumstance, so it is necessary to allow local authorities to make minor variations. The minimum funding guarantee is one example. The calculation of the amount of the minimum funding guarantee depends on a comparison of the funding on a like-for-like basis over two years in a school’s budget. However, when a school is changing size, perhaps as a result of adding a new year group or a new class, such a comparison is not possible unless a variation is made to the MFG. Such a variation usually consists either of adjusting the baseline used in the MFG or of adding on any new funding to the school’s budget once its MFG calculation has been worked out. Either way, the effect is to ensure that the school’s guaranteed funding level is calculated fairly and is consistent with all other schools covered by the local authority. Similarly, and as I have already mentioned, the amount of funding that a local authority may retain centrally from its schools budget is limited by the regulations. That is an important safeguard to ensure that schools receive the benefit of the Government’s year-on-year investment in education. However, there might be exceptional circumstances where the amount of centrally retained funding needs to exceed the limit that is placed on it by the regulations. For example, a local authority might face some significant unexpected costs to provide for the education of a child with severe or complex needs. At present, variations to the regulations such as I have described can be agreed only by the Secretary of State. Under the new regulations, if agreement can be reached over certain matters between a local authority and its schools forum, we believe that there should be no need for the Secretary of State to be involved at all. This is an important devolution of power and responsibility. However, if agreement cannot be reached locally, the Secretary of State retains powers to determine such requests. That is what in outline the regulations do. We have, of course, consulted widely. There was majority support for all the specific issues raised in the consultation. Inevitably, some concerns were raised. Despite an overall majority in favour of the introduction of school budgets based on a single pupil count, some believe that the new provision as originally drafted did not provide enough flexibility to recognise the immediate financial pressure that might be caused by an exceptional, unplanned change in a school’s circumstances. For example, there was concern that a sudden, unexpected influx of pupils into a school would result in immediate costs that would not be recognised by using a single count date for pupils taken prior to the start of the year. In fact, the draft regulations on which we consulted made provision for such instances. However, in the redrafted regulations and the accompanying guidance, we have made the provision more explicit. A more substantive concern related to the effects of the single pupil counts in January of each year on those primary and nursery schools that admit their nursery and reception children at three points during the year—September, January and April. A number of respondents to the consultation argued that using only a January count date for the purposes of school budgets would mean that pupils admitted in April would not be counted and that therefore no funding would be allocated for them. We think that this is a legitimate concern and, in response, the regulations have been redrafted to account for the financial effects on schools that operate a third admission point. In simple terms, we have allowed local authorities to add the number of nursery or reception pupils admitted in the previous April to a school’s January pupil counts in determining its funding. That takes account of the third admission point but also ensures that the schools in question receive the same benefit of being given stable budgets at the start of the financial year as schools that do not have such admission arrangements. These regulations give schools unprecedented certainty and flexibility in their budgeting. They will enable schools to plan ahead better and to get on better with the essential tasks of teaching and learning. On that basis, I commend them to the House. I beg to move. Moved, That the draft regulations laid before the House on 19 January be approved [15th Report from the Joint Committeeand 22nd Report from the Merits Committee].—(Lord Adonis.)