Select Committee on Work and Pensions Minutes of Evidence

Supplementary memorandum submitted by the Department for Education and Skills (DfES) (ES 13A)


  From April 2002 all school sixth forms in England are being funded by the Learning Skills Council (LSC), through a new approach. Every school sixth form is funded either at the level of its Real Terms Guarantee (RTG), or through the LSC's own funding formula. The RTG is based on estimates of LEA expenditure on the sixth form in 2000-01, using information taken from the Local Education Authority's (LEA) Section 52 budget statement. That figure has been uplifted to 2002-03 prices, taking into account any injection of funds by the LEA to the sixth form in 2001-02 to recognise the broader post-16 curriculum. It has also been adjusted to reflect pupil numbers changes to September 2001. No end date has been set for the RTG, but Ivan Lewis has said it will last at least for the length of this Parliament.

  The LSC's formula funding provides schools with funding related to the qualifications being studied, weighted according to different qualification types and subjects. It also includes funding for key skills and enrichment and additional funding if appropriate for extra area and disadvantage costs. The formula benefits high achieving schools with wide-ranging programmes, a good mix of subjects, low dropout rates and pupils from disadvantaged backgrounds.

  The LEA receives funds from the LSC that are clearly identified for each school with a sixth form.The school's allocation is either at the RTG or the formula funding level—whichever is higher. Nationally in 2002-03 about 2/3 of sixth forms will be funded through the LSC's formula and about 1/3 at their RTG level. The LEA is not constrained in any way from adding to the school's budget, be it RTG or formula based, from it own resources, should it choose to do so.

  We have promised on a number of occasions that the amount of funding lost from an LEA's Standard Spending Assessment (SSA) budget will be matched by the amount it receives from the LSC; that commitment still stands. However, we recognised earlier this year that for some authorities a higher LSC allocation could take up a substantial proportion of the increase in Education Standard Spending Assessment or could mean the LEA being left with a negative or small post-16 SSA after the deduction of the sum to match the LSC's allocation. To meet these concerns LEAs have been allowed additional flexibility in the way they fund schools, and those LEAs that have been most significantly affected have been provided with extra grant resources from the DfES. 34 LEAs will receive grants for 2002-03 under terms announced on 30 January 2002. These grants guarantee all LEAs a minimum level of residual post-16 SSA, and that the great majority of their increase in education SSA will be available for purposes other than sixth form funding. For example, Barnet receives a grant of £800,000 on this basis.

  In January and February LEAs and the LSC identified the need for further corrections to some of the allocations data. Ministers have approved the payment of further special grants to LEAs where the final LSC sixth form allocation, after the corrections to the data at school level, was less than that assumed when the SSA deduction was made on 30 January. This ensures that no LEA is worse off overall.

  In early 2002, many head-teachers and their associations expressed concern that some LEAs were seeking to compensate fully for any additional sixth form funding coming from the LSC by adjusting the 11-16 element for the school, leaving the school little or no better off than before. There has been some more recent concern over the final budget set by LEAs for schools with sixth forms. Some schools had not appreciated that the LEA can legitimately subtract from the total budget share any funding that is duplicated in both the LSC allocation and the LEA's own formula.

  In response to all these concerns, in early May the DfES issued a note to all LEAs, which was copied to LSC local arms. It explained that the Financing of Maintained School Regulations for 2002-03 have been amended to operate in the following way:

    (a)  the full LSC allocation must be added into the school budget share calculation as a separate factor;

    (b)  the LEA may add a further sum of its own for sixth forms if it wishes;

    (c)  the LEA may, if it wishes, use one or both of the following factors (which always have a negative value) in the budget share calculation:

      (i)  a factor which eliminates the double-funding inherent in the Real Terms Guarantee methodology. The RTG was calculated by taking age-weighted pupil factors for sixth formers and adding to that a proportionate share of other (non-age-related) funding delegated to the school. This means that where an LEA ran its funding formula in the usual way for 2002-03, the budget share calculations would produce an element of double-funding.

      (ii)  a factor which deducts up to two thirds of the difference, if any, between a school's adjusted RTG and its actual LSC allocation. The power to do this was introduced in response to LEA difficulties with the higher allocations. Limiting the deduction to two-thirds was designed to ensure that schools saw some benefit from allocations above their RTG, with higher gains in 2003 when it is planned that the deduction allowed will be limited to one-third, No deduction will be allowed from 2004.

    (d)  The net result should always be that a school's total funding includes an amount at least equal to its adjusted RTG.

June 2002

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