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Lord Thomas of Gresford: As, in any event, these clauses will not remain as they are and as there is to be a rehash before Report by the Government, for the moment I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 58 agreed to.

Lord Bassam of Brighton: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

17 Jul 2003 : Column 1026

Schools Funding

2.46 p.m.

The Parliamentary Under-Secretary of State, Department for Education and Skills (Baroness Ashton of Upholland): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Secretary of State for Education and Skills. The Statement is as follows:

    "Mr Speaker, with permission, I would like to make a Statement about the funding of schools in the years 2004–05 and 2005–06. It is important to begin with an assessment of the changes which have taken place in the last six years. Our country now has the best results at ages 11, 14, 16 and 18. We have tackled the shameful neglect of our school buildings and, by 2005–06, we will be investing over 5 billion in repairs and new buildings.

    "We have delivered major increases in school spending. Schools funding is up by more than 25 per cent, in real terms, per pupil. There is no secret where the money has gone. We now have 25,000 more teachers and 80,000 more support staff than in 1997.

    "Moreover, teachers' pay has improved significantly; for example, in 1997, a teacher with six years' experience would have been receiving 20,040, while his counterpart today will, from September, receive 26,460. This is a real terms increase of 13 per cent. And we have started down the road to a fundamental improvement in teachers' workload and working arrangements. Those are all achievements of which teachers, heads, governors, and local and central government can be proud.

    "However, there is no doubt that these changes have led, for very many schools, to real difficulties with this year's budget allocations. As I set out in my oral evidence to the Education Select Committee earlier this week, a wide range of factors contributed to this situation. I will not repeat them here, but I wish to put on record my appreciation of the hard work of head teachers and local education authorities across the country to manage through these difficulties and to continue to improve the quality of education provided by their schools.

    "In my Statement on 15th May, I said that I would keep the House informed of my thinking and give head teachers and LEAs early indications of our approach to help them to begin planning for next year. My purpose today is to outline the first steps we are taking to respond to the practical concerns raised by schools about the present system. Following continuing consultation with representatives of local authorities, chief education officers and head teachers, I will make a further report to the House in the autumn.

    "My guiding principles for the changes needed to the schools funding system for the next two years in order to deliver that are: that every school should receive at least a guaranteed per pupil increase in its funding for each year; that central and local government should achieve earlier announcements of

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    the financial allocations to schools so that heads have greater certainty and time to plan; that we should provide greater stability through a two-year settlement on teachers' pay, ring-fenced grants and the guaranteed per pupil increase in schools funding; that there should be greater transparency in the overall system of funding for schools; and that the reforms agreed with the key workforce partners, as reflected in the national agreement on raising standards and tackling workload, should be sustained.

    "The Government have been working intensively to identity a package of measures that will deliver these aims. This year my department provided a guaranteed minimum increase in education formula allocations for each local education authority. In 2004–05 and 2005–06, I intend to go a stage further. My central proposal for each of these two years is to provide a guarantee at the level of the individual school. So every school will receive at least a minimum increase in its funding per pupil. Of course, many schools will receive more than this minimum. We intend to implement this through fair funding regulations, placing each local education authority under a direct obligation to provide for such a minimum guarantee. I will confirm the minimum percentage increases for 2004–05 and, provisionally, for 2005–06, by the time of the provisional local government finance settlement in November, when we have completed our analysis of costs in the system, in particular, on teachers' pay. We will share that analysis, and the rationale for the level of the minimum percentage increase, with our education partners.

    "This guarantee will provide for a minimum funding increase in every school. That minimum will be based upon the average cost pressures for 2004–05 and 2005–06. Obviously, it cannot match the precise composition of each school's current spending profile. For example, it cannot insulate schools from the effects of changes in their pupil numbers, nor reflect their wide range of different staffing arrangements. Heads and governors will continue to need to plan ahead, with their local education authorities, to take account of those features which are specific to every school. But I believe that our average per pupil guarantee will give schools a far more stable foundation.

    "We are already discussing with our education partners how the guarantee will work in detail, and we will consult further. We will seek to agree guidelines to underpin the operation of these new arrangements, in order, for instance, to take proper account of the extra protection that local education authorities already provide to very small schools. Within this framework, local education authorities, heads and governors will work together through their schools forums to agree the funding baseline to which the guaranteed per pupil increase will be applied.

    "For sixth forms, the Learning and Skills Council will, in both the 2004–05 and 2005–06 school years, provide each school with guaranteed minimum

17 Jul 2003 : Column 1028

    increases in funding equivalent to the per pupil guarantee for schools. The LSC will consult all heads of maintained schools with sixth forms in the autumn on its plans for improving the operation of sixth-form funding for 2004–05.

    "Some schools have found it necessary this year to spend from their reserves or devolved formula capital allocations. Others have set deficit budgets by agreement with their local education authorities. Of course, schools and LEAs have the primary responsibility to manage the ongoing consequences of such decisions, including maintaining sound financial management and balancing budgets. The changes I am introducing for 2004–05 and 2005–06 will help them to do so. However, I recognise that there may be some cases where doing so could be beyond the capacity of individual schools and local education authorities. In those few cases, I will be prepared to consider limited, transitional support to avoid damage to children's education, where that is part of a locally agreed recovery plan between the local education authority, the school and the department. I shall discuss with head teachers and local authority representatives how best to provide such support.

    "Of course, the minimum guarantee which I am offering today to schools can only be fulfilled by ensuring that each local education authority has the necessary resources within its schools budget. There are two key elements. First, in both 2004–05 and 2005–06, I will set the minimum increase for schools formula spending share (SFSS) in each authority at a level which will cover the school level guarantee and provide the headroom necessary to enable the local fair funding formula to work; and to help provide transitional support to individual schools, where necessary. Secondly, we will ensure that the local authority receives sufficient central Government grant to 'passport' in full the increase in SFSS into its schools budget.

    "The Government will also provide additional resources for other local services, including children's social services, which are now my responsibility, over and above those announced for them in the last spending review. This will help to ensure that the arrangements I am announcing today do not create difficulties for other local services. The details will be announced in the autumn. Having provided these resources, the Government are determined that each and every school should benefit in the way intended. My right honourable friend the Deputy Prime Minister and I will be writing to every local education authority setting out the Government's clear expectation that, barring wholly exceptional circumstances, each and every local education authority should 'passport' the full increase in its SFSS into a matching increase in the schools budget. This is essential if heads, governors, teachers and parents are to have full confidence that the resources intended for schools will get through to schools. I have statutory powers

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    to require local education authorities to set a minimum schools budget and I will be prepared to use those powers where it is necessary to do so.

    "This year most local education authorities' spending on centrally funded pupil services, such as special educational needs and excluded pupils, has increased significantly faster than their spending on budgets delegated to individual schools. It is essential that in future the individual schools budget receives its fair share of any increase. So my intention is that in 2004–05 and 2005–06 spending on such central items should rise no faster than spending on the individual schools budget. I will consult on how fair funding regulations can ensure that this is delivered. In doing so, I will take account of the need for local flexibility on items such as the expansion of nursery provision to meet the Government's commitments.

    "It is clear that a significant source of problems for some schools this year has been the change in the Standards Fund. I will help provide stability and security by maintaining, and inflation proofing, the support the Standards Fund provides to schools at its 2003–04 levels. This means that I am reversing the reductions previously announced for Standards Fund support to schools in 2004–05 and 2005–06. This will provide more than 400 million in each of the next two years, over and above existing plans. I will also be making earlier announcements on Standards Fund distribution, before the announcement of the provisional local government finance settlement.

    "I am able to make this additional funding available from my end year flexibility, and other redirection of existing resources. I have previously set out for the House in my department's annual report the planned and prudent use of accumulated end year flexibility over the next three years to supplement resources secured through the spending review. This additional commitment means that my accumulated end year flexibility is now fully committed to support children, young people and adults achieve their full potential.

    "Head teachers should know their budgets in good time for the beginning of the financial year. I am taking a number of steps to provide earlier notification of their funding. As well as earlier notification on the Standards Fund, the Government will bring forward the date of the provisional local government settlement to the middle of November. We also intend to bring forward the date by which local authorities are obliged to notify me of their 'passporting' intentions by one month to the end of December, and the Government will propose an appropriate amendment to the Local Government Bill at Third Reading in another place.

    "It is vital that the reforms we agreed with key workforce partners, as reflected in our national agreement on raising standards and tackling workload, are sustainable. That remains a key priority for my department. By maintaining the Standards Fund at its current level, we will help to ensure that schools receive the core funding they need to make progress on implementing the workforce agreement.

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    "On 11th July, I submitted my evidence to the School Teachers' Review Body. The evidence makes the case for a two-and-a-half-year settlement on the basis of current targets for inflation. I have set out a clear strategy to enable sensible progression along the upper pay scale while controlling costs and I have asked the STRB to report on all the major issues in early November, so that local education authorities and schools will have much earlier certainty about the level of pay cost pressures for the next two years.

    "This year's problems have underlined the need to provide more and better support for schools and education authorities in planning and managing resources, and for schools forums, which have a key role to play in helping to secure local consensus on distribution. We will be discussing with education partners, the National College for School Leadership and others how best we can make rapid progress.

    "Finally, I want to make clear that this package is designed to secure stability, and to restore confidence in our funding arrangements for schools. We need to ensure that the schools funding system commands broad support; works to promote our overall objectives for raising standards in education; and ensures that resources are used in the most effective way to secure higher quality and better levels of achievement in schools. I will of course be monitoring the impact of the changes that I am announcing today, with a view to considering whether further changes are needed for 2005–06. It is critical to ensure that funding arrangements for schools are sustainable in the long term.

    "I recognise that this has been a difficult year. However, I believe that the steps that I have outlined today provide a realistic framework of stability and certainty for the next two years. We will now work with education authorities and schools within the framework that I have set out today to deliver the further improvements that our children deserve".

    My Lords, that concludes the Statement.

3.1 p.m.

Baroness Blatch: My Lords, I am grateful to the noble Baroness for repeating the Statement. There will be a bemused sigh of resignation throughout the ranks of head teachers, teachers and governors about it. We have the familiar format: fine words and laudable sentiments; but where is the key information that will deliver the declared aims of the Statement?

Nothing was said in the Statement about the department's own spending or possible economies. Unless schools know with some assurance the quantum of funding to be made available during the next two years, what is to be taken into account and the system of distribution, simply claiming that the settlement will represent an increase in real terms is not good enough. That is what happened this year, and witness the chaos that followed. The crisis that has precipitated the Statement is of Ministers' own making. To date, there has been no apology.

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What is baffling is the way in which the policy paper, Fair Funding, was hailed as the answer to the problems of funding in our schools. It promised transparency and simplicity; neither aim was delivered—so much so that Mr Charles Clarke and Mr Miliband appeared not even to understand what has happened to their so-called generous settlement.

This year's settlement was made in triumphant mode. Within days, it was clear that it had been ill-thought through, was misleading and, frankly, in presentational terms had been completely bungled. Local government, officials in the department and even heads and governors have been made scapegoats throughout this debacle. They have been made to answer for the sheer ineptness of Ministers in the department. No, the buck stops on the desk of the Secretary of State.

At the same time as all the confusion surrounding this year's settlement, when schools were making teachers redundant, spending precious capital on revenue, running deficit budgets, and when enormous sacrifices were being made by other teaching staff to avoid their colleagues being made redundant, the department underspent by almost 1 billion.

Reading the Statement today, it would appear that the Government are behaving true to form. They have resorted to departmental control of the whole funding system. On the face of it, the Statement is well intentioned but incomplete. The promise of two-year stability and a real terms increase in funding per school and on a school-by-school basis is of course welcome. Schools will welcome that. But a real terms increase was promised to schools this year on a school-by-school basis. Witness the chaos that followed.

The Statement reads:

    "my department provided a guaranteed minimum increase in education formula allocations for each local education authority"—


    "I intend to go . . . further".

The central proposal is for each and every school to receive at least the minimum increase in its funding per pupil. Will that be through the FSS? As the noble Baroness will know, that is no guarantee of actual funding. The FSS is not necessarily backed up by real funding; that depends on what happens via the LEA. If that is at the expense of funding on other services, such as social services, special educational needs or youth services, is it a matter of, "So be it"?

What about LEAs that are already spending well above what the Government deem appropriate for their schools? Will schools that are already on a high level of expenditure and allocation of grants from their LEAs receive the same increase as those that are not? Is it to be allocated on the basis of the funding in each school at the time, or will a more sophisticated judgment be taken of what has been the allocation?

In the Statement, the Government refer to average cost pressures. As the noble Baroness will know, if there is to be a uniform increase school by school, average cost pressures fall differently on different schools. How will

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that be taken into account? Let us remember that the promise in the Statement is that we shall receive the detail in September, October or November—if it is genuinely to be earlier than we normally expect information to be available to local authorities.

What about those schools that have gone into deficit this year? What about those schools that are spending precious capital on revenue spending? What about those schools that have deferred spending? Will they receive some compensation to get them up to the level at which they can properly enjoy the increase?

The Statement says that schools forums will agree the funding baseline. That goes well beyond what the Act of Parliament states. If schools forums have the power to agree, are we now to understand that they will determine the funding baseline for schools? What percentage increase on what they provided last year, or on what schools are spending on sixth forms, will learning and skills councils provide? Again, with her experience, the noble Baroness will know that schools do not separately fund their sixth forms. Schools are funded on the basis of the whole school. Once they receive the money, they regard that as for the whole school. So what assessment will be made of sixth form funding?

The Government say that they will,

    "ensure that the local authority receives sufficient central Government grant to 'passport' in full the increase".

I want the noble Baroness to give us an absolute assurance that all the caveats that I have listed will be taken into account. That is essential.

The statements to be made to schools this year were made before this year's settlement. Schools believe the Government. The Government should be warned that they are raising huge expectations in our schools. If they do not deliver, surely judgment will follow.

Extraordinarily, the Statement continues:

    "This year . . . local education authorities' spending on centrally funded pupil services, such as special educational needs . . . has increased significantly faster than their spending on budgets delegated to individual schools".

Is it the Secretary of State's judgment that they are spending too much on SEN—that that spending is excessive or unnecessary? The Statement then says that the Government will ensure that that increase in spending on special educational needs does not run ahead of normal expenditure. We all know that the Special Educational Needs and Disability Act 2001 required spending on special educational needs over and above the normal allocations, but from reading the Statement, it appears that schools and LEAs that will be mightily handicapped in delivering that.

On the Standards Fund, the Government used fine words in the Statement but, frankly, they are admitting to an error that has caused enormous pain in our schools this year. Further to the reference to the STRB, can we have an assurance that if it reports in early November, as we hope it will, the Government's response will be made known to LEAs and schools before November is out?

The Government are promising greater predictability, which is welcome, and greater accurate and transparent information which, if it is true, is also welcome. Local

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authorities' priorities must not be subject to second-guessing, if that means other pressing and sometimes obligatory duties to address the requirements of special educational needs children or social services for children, especially following the Climbie report.

Central control is now the order of the day, so now we know clearly who to hold responsible should anything go wrong in next year's settlement. The Government are in no doubt—it is now on notice—that they are raising expectations with fine words. They have not been forgiven for this year's debacle and they will be judged very harshly if they create a repeat of this year's chaos next year.

3.11 p.m.

Baroness Sharp of Guildford: My Lords, I, too, welcome the Statement and thank the Minister for repeating it in this House. However, I echo the words of the noble Baroness, Lady Blatch: what is there to crow about in the Statement? As with this year's Statement about school funding, which was made with great triumph and came unstitched in very little time, this one is full of promises, but we have yet to see whether they can actually be delivered upon. The previous Statement was made with great aplomb. When it began to become unstitched, Ministers blamed, first, the local education authorities for sticking around 500 million down the back of the sofa at the town hall, and, secondly, headteachers for being incompetent by taking on too many staff. Teachers were now being paid too much.

Now we are being told that too much is going into the SEN budget—again, we have heard that before. When the Special Educational Needs and Disability Act was going through this House we told the Minister, time and again, that the requirements for funding of the Act would be considerably greater than was suggested in the Explanatory Notes. Very considerable obligations have been placed upon local education authorities here. It is very right and proper that their spending should increase. It is about time that Ministers stopped trying to blame someone else for those problems.

Does the Minister agree with the statement made by Mr Barnaby Shaw, the DfES school improvement and excellence manager, who, on 4th July at a Local Government Association conference, said:

    "When you try to analyse what went wrong [in this current year] the fault lies with the DfES"?

Later, the Deputy Prime Minister, speaking at the same conference, admitted that the situation had been exacerbated by certain ill-thought-out statements.

We welcome some aspects of the Statement. It is splendid that schools are to have greater certainty about their funding and promises of stability for two years in school budgets. There is also a promise of greater transparency in the passing through of the school Standards Fund. However, greater stability, in particular a longer-term settlement, the prospect of a two-year pay deal and guaranteed per pupil increases, are precisely what was promised last year. How can we believe that the promises will come through this year when they were made last year?

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Can the Minister tell me what assurances as to additional resources the department has obtained from the Chancellor of the Exchequer to support the new two-year pay settlement? If he has not given any such assurances, who will be the losers in the guarantee that the Minister has announced today? What plans has the department to model the new proposals to ensure that they do not come unstuck in the same way as this year's proposals did? Will the Minister agree with the need to bring forward the School Teachers' Review Body process so that pay settlements can be calculated into LEA budgets alongside the revenue support grant settlement for local authorities to set their budgets?

Again, we welcome the announcement that there is to be greater transparency. But does the Minister agree that it is not the transfer of the Standards Fund to the core budget that was this year's problem but the 400 million that was siphoned off on the way by the Secretary of State? To aid transparency, will the Minister publish in November the inflationary pressure that she expects schools and local education authorities to absorb within the two-year budget settlement so that we can judge the real levels of increased resources?

Can the Minister confirm that not a single teacher or classroom assistant made redundant this term—it is significant that the Statement is being made on or around the last day of term for many schools—will be re-employed as a result of the Statement? Will she confirm that no additional resources will be given to schools with deficit budgets or those which have been using their balances or devolved capital, and that a recovery plan is, in effect, a loan to be paid back? Will the Minister confirm the Secretary of State's statement to the Select Committee on Monday that, in effect, schools with deficit budgets might need to take a little longer to implement the workload reforms?

Can the Minister explain further precisely what amendments are proposed to come forward with the Local Government Bill? I understand that the opposition Benches have been asked not to table amendments to the Local Government Bill at Third Reading. If I may say so, it is a little rich that the Government, having asked opposition Benches to co-operate in that way, should propose to table very substantial amendments to the same Bill.

I thank the Minister for making the Statement. But there are many unanswered questions to which we would like answers.

3.17 p.m.

Baroness Ashton of Upholland: My Lords, I am grateful to the noble Baronesses, Lady Blatch and Lady Sharp, for the welcome that they have given to the thrust of the Statement. In response to the noble Baroness, Lady Sharp, I do not think that either my right honourable friend or I were crowing about anything. Rather, we were trying to bring forward, as schools break up for the summer—my schools do not break up until next week—the information that we felt would be helpful. That is our intention. I am pleased

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that that has been well received. We have said that we will bring forward the details of the discussions in the autumn—I look forward to doing so in your Lordships' House. I shall try to answer as many of the individual points raised by the noble Baronesses as possible.

I should say immediately that this is not about creating scapegoats. On many occasions, my right honourable friend and I have talked about the shared responsibility that we feel with our partners in the education authorities and in schools to ensure that we have the best possible education system. That remains the case. The noble Baroness, Lady Blatch, talked about the departmental underspend, as she referred to it. She will know from her own time in government that there is a cut-off point that allows moneys to look like underspend when they have been committed. But, on the statements that I have made about the changes on the Standards Fund, a great deal of the 400 million per year for two years has come from funds that we have been able to reallocate either from within those areas of finance or from reprioritising.

The noble Baroness, Lady Blatch, asked how we ensure that schools have that guarantee. I say to both noble Baronesses that the guarantee last year was centred on the education authority, it was not at individual school level. That is a change for the following year because of the difficulties that arose. The noble Baronesses would be right to say that it can be fulfilled only by ensuring that there are enough resources within the school budget. That is why I said in my Statement that there would be a minimum increase for schools formula spending share in each authority at a level to cover the school level guarantee and to provide the headroom necessary to enable the local funding formula to work. I hope that that will deal with those issues.

I recognise what the noble Baroness, Lady Blatch, said about differing cost pressures. We will be looking at an average cost pressure, and, within that, ensuring that the schools forums can discuss how it would apply to individual schools. For example, I mentioned the issue of small schools and the fact that education authorities often have formulae that enable them to thrive. We would be very clear—

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