School Finance (England) Regulations 2006

My Lords, we welcome the regulations and the general direction of the policy on school financing that they represent and deliver. The problems over school funding in 2003–04 were a salutary lesson for the Government and civil servants and, indeed, for us all. It is important that we put in place a system that combines certainty and stability with a degree of local flexibility that does not go on to undermine that certainty and stability. We welcome the principal policy behind the regulations, the new ring-fenced dedicated schools grant, the multi-year budgets and the rationalisation of standards grants. We also welcome the rationalisation into one set of regulations and the fact that they cover two funding periods—2006–07 and 2007–08—with the intention of having three-year funding periods in the future in line with the spending review cycle. Despite the simplification, however, school funding is still incredibly complicated. The Minister will know that my honourable friend in another place, Nick Gibb MP, says that, notwithstanding that he is an accountant, he finds the methodology confusing. There is an array of guidance notes on Teachernet. In theory, things should be relatively straightforward, but they are not. There is a guidance note on setting school budgets for 2006–07 and 2007–08 for local authorities and school forums—I find it very hard to say ““school forums””; I am sure that it should be ““school fora””. There is a note on the single pupil count. There is guidance on the use of the dedicated schools grant to deliver more practical learning opportunities at key stage 4. There is a central expenditure limit technical guidance note, a central expenditure limit calculator, a minimum funding guarantee technical guidance note, and a minimum funding guarantee calculator. There is a new document—the School Finance Regulations 2006—and a ““pupil projection toolkit””. There is also a Learning and Skills Council proposal for sixth-form funding in 2006–07. Complexity adds to the difficulties that head teachers have in managing their budgets. It also decreases accountability and transparency. The complexity of the funding is a contributory cause of large numbers of schools running deficits. Will the Minister confirm that 1,866 schools are currently in deficit and that, of those, state nursery schools had debts totalling £277,000 in 2004–05, primary schools had debts totalling £34 million and secondary schools had debts adding up to £86 million? Will the Minister confirm that those figures on the amount of funds involved are right? Will he also confirm that 10 primary schools are in deficit to the tune of at least £247,000 and that 10 secondary schools had debts exceeding £858,000? Will he deal with the question put in another place by the honourable Member for Weaver Vale, and explain how many schools are sitting on reserves and what is the cumulative total of those reserves? The Minister talked about the single pupil count. The key regulations before us are Regulations 14 and 15, which require local authorities to use a single pupil count to calculate the individual school budgets. Why any school would want to remain on the five-twelfths and seven-twelfths system baffles me. The single pupil count is defined in Regulation 14(6) as the number of registered pupils at the school on 19 January 2006—a Thursday—for funding period 1, and on 18 January 2007, which is also a Thursday, for funding period 2. As the Minister explained, there was massive support for the regulations during the consultation. Some 53 per cent of people said that they were in favour of the principles, with 42 per cent against. The Secondary Heads Association, for example, said:"““This is a sensible balance between predictability and flexibility and works well in many authorities already. There may need to be some local sensitivity and flexibility””—" I think the Minister made that clear—"““in the first two years as schools adjust—but eventually it works perfectly well””." The Chartered Institute of Public Finance and Accountancy was also in favour of the proposals, but was unclear about the meaning of Regulation 21(3), which relates to the flexibilities in the formula as a result of changes to pupil numbers partway through the year—an issue, again, to which the Minister referred. Regulation 21(3) has been removed from the final draft of the regulations. Will the Minister therefore confirm that paragraph (3) was removed because it added nothing of substance to the remainder of Regulation 21? As the Minister said, concern was also expressed during the consultation about primary schools that operators staggered intake in the reception year and how that could affect funding if the count took place in January, with another intake arriving at Easter. In response, the Minister said that those concerns had been addressed in the finalised regulations. It is clear from Regulations 14(7) and 14(8) that pupils admitted in the summer will count towards next year’s funding; that is welcome. When there are unplanned changes to or significant increases in pupil numbers, the Explanatory Note says that the regulations allow local authorities to provide funding from their central resources and that the department will issue explicit guidance about that. That guidance is right when it says:"““In deciding whether a school needs an in-year increase in its budget for a pupil number increase, local authorities should consider the impact on the school’s costs, rather than simply applying a percentage threshold increase in pupil numbers””." It goes on:"““Such an approach will take into account the need of schools to put on additional classes, and hence incur significant additional costs, and also what proportion those additional costs are of the overall budget of the school””." That must be the right approach. The associated issue is that of deductions from funding when pupils are removed from a school’s roll and attend alternative provision. The SHA stated:"““A pupil leaving the school for whatever reason after the start of the year does not enable the school to make any appropriate savings. The removal of funding when a pupil leaves does not encourage schools to support the move to an alternative placement; nor is it an efficient way of funding alternative provision””." Will the Minister set out how those concerns were dealt with in the final draft of the regulations? The Minister will be aware that my honourable friend the Member of Parliament for North Wiltshire, James Gray, was given assurances by the Minister for Schools in another place that the Learning and Skills Council is working on proposals for the expansion of schools. When will the LSC present its findings to Ministers? The decision to allocate teachers’ pay grant money through the pupil numbers formula might adversely affect schools with a high proportion of experienced and effective teachers. According to initial calculations, the decision, if fully implemented in 2006–07, would mean a loss of revenue to the school of between £15,000 and £18,000 a year. Even if the change were phased in over three years, it would still have a similar impact in three years’ time, because no retirements are anticipated in that period. Will the Minister say how such a school should deal with that issue, and whether there is flexibility in the regulations to assist schools in local constituencies, for example? On schools forums—again, I am sure it should be ““fora””—and accountability, the Local Government Association expressed its view well. It stated that:"““the LGA considers that Schools Forums have worked well as consultative bodies. It can see the benefits of giving them power to agree certain regulation changes in order for the local authority not to have to seek the permission of the Secretary of State. However it is against giving them decision making powers which should properly be the province of the local authority””." The LGA makes a serious point about democratic accountability. Yes, there is a case for a formal consultation body made up of local head teachers and other stakeholders, or constituents, to advise policy makers and elected officials on decisions. Ultimately, however, such decisions need to be taken by people who are accountable to the electorate, however technical and detailed that process might be. Today’s technical issue is tomorrow’s point of principle. The National Union of Teachers is concerned. It states:"““We do not agree with the proposal that local authorities need only consult their Schools Forum on changes to the local funding formula. Schools forums have an important role to play, but are not the only local stakeholders in education. Local stakeholders that are not represented on the Schools Forum, including unions and individual schools, need to continue to be included in consultation on changes to the funding formula. Such changes will have a potentially significant impact on individual school budgets””." The SHA has also expressed concern in respect of the power that schools forums should have. Even though it may seem rather unfair to detain the House at such a time, will the Minister explain the changes in the regulations to the rules on prudential borrowing? These are complex issues and perhaps they should not be quite so complex. I hope that the regulations will be a first step towards simplifying the whole funding regime for schools. There is still much further to go, but we support this first step.