Supplementary Memorandum submitted by
the Department for Education and Skills (DR08)
Question 86: What will be the impact of the new
Local Education Authority (LEA) Funding System on Schools
1. In the new system, two main funding blocks,
to be distributed through separate formulae, are proposed: one
for schools and one for LEA functions. Each authority's share
of the schools funding block will be known as its schools funding
assessment. The aim is to introduce clarity around the funding
being made available for schools and for LEAs.
2. The Government will be introducing a
transparent account of school funding that authorities will send
to all council tax payers. The account will compare an authority's
budget for schools, with the schools funding assessment, and will
include a year on year comparison. The aim is to show very clearly
if the funding being made available for schools by the Government
is being passed on to schools by local authorities, and so put
pressure on authorities to pass on increases.
3. The Education Act 2002 includes a reserve
power for the Secretary of State for Education and Skills to set
a minimum level of budget, where she believes the proposed schools
budget set by an authority is seriously inadequate. It is expected
that the reserve power will only be used in exceptional circumstances.
4. In the September 2000 Local Government
Finance Green Paper a commitment was given that no authority's
schools would lose out in real terms as the new system of LEA
funding is introduced. We are currently considering how best to
implement this guarantee.
5. The consultation on the new system of
LEA funding ends on 30 September. Ministers will take decisions
on the final form of the system in October, and the provisional
Local Government settlement for financial year 2003-04 will be
made at the end of November, and finalised at the end of January.
Question 98: Use of information from the 2001
For the 2003-04 funding arrangements for LEAs
the Department will be using the population figures from the 2001
national census. The sparsity indicators from the 2001 census
will not be available in time. We are not planning to use any
other data derived from the census in the 2003-04 arrangements.
Question 98Measures of deprivation
1. The Department is committed to tackling
deprivation and educational under-achievement, wherever it is
found, and is playing a key role in the Government's strategies
to renew deprived neighbourhoods and combat social exclusion.
2. The Department recognises that the use
of the postcode to identify deprived individuals is inadequate
as it only identifies deprived neighbourhoods. In some urban areas
affluent individuals live in the same postcode as those from lower
socio-economic groups. Targeting resources on these mixed postcode
areas may result in help being directed to some people who do
not need it. Further information about the individual is required
to do determine if a household is deprived (eg on their education,
income, employment, health, housing etc).
3. The standard indices of deprivation take
a wide range of statistical information from a range of Government
Departments. A list of 88 Local Authority Districts that are deprived
areas is produced which is essentially the lowest geographical
denominator available from the information. These are the focus
of the Department's Neighbourhood Renewal agenda. The Department
is represented on the project which is developing and further
refining the indices of deprivation. This project, will almost
certainly look at whether there is sufficient data across Government
that can help define areas of deprivation in terms of smaller
4. The Local Statistics Unit within Analytical
Services has been set up to help the Department maximise the quality
and range of local statistics we can disseminate and to help policy
colleagues link these local statistics with the Neighbourhood
Renewal areas. It will help Analytical Services develop its datasets
so that better local statistics can be produced and improve the
Department's work on Neighbourhood Renewal issues.
5. The Local Statistics Unit also contains
experts on mapping and Geographical Information Systems. It has
helped the Department sign up to the Cross Government Agreement
to access free Ordnance Survey data. This data will enhance the
Department's ability to map the impact our polices and programmes
are having on local areas. It will also help us share information
across Government Department's to help join up policy thinking
to tackle Neighbourhood Renewal.
6. Members of the Local Statistics Unit
play an active part in cross Government meetings that play a vital
role in helping promote Neighbourhood Renewal issues.
7. Some of the ways that the Department
is addressing the question of deprivation in its main programmes
are indicated below:
Nursery Education Grant
8. Nursery Education Grant for three year
olds was introduced in September 1999. Universal funding of four
year olds has been in place since September 1998. In 2000, the
Government made the commitment that there would be universal funding
of three year olds from September 2004. Until then, available
funding is allocated to LEAs primarily according to their position
on the Department for Transport, Local Government and the Regions'
Index of Multiple Deprivation. Currently 65 of the 150 LEAs have
achieved universal funding. The remaining LEAs are responsible
for devising criteria for distributing places in their area according
to social need.
9. This is the first Government to have
specifically funded free nursery education for three year olds.
In 1999-2000 £40 million was made available for this purpose.
This was increased to £100 million in 2001-2002 and, over
the three financial years 2001-02, to 2003-04, a further £986
million will be made available for the creation of new, free nursery
places for three year olds and for other early years initiatives.
£275 million of this will be available in 2002-03 to further
increase free early education for three year olds.
10. Over 66 per cent of three year olds
in England are currently able to access a free nursery education
place and 170,000 free places for three year olds have been created
11. Currently 65 of the most deprived LEA's
offer a free place to all three year olds in their area. Recent
funding increases will mean a steady increase in places for three
year olds in the remaining authorities. All LEAs will be able
to offer all three year olds access to a free early education
place by September 2004.
12. £6 million of capital funding has
been made available to aid the conversion of playgroups to enable
them to provide full daycare. Areas of disadvantage are given
priority. The first three million will become available in 2002-03,
with the second £3 million following in 2003-04.
13. The Government targets capital funding
at those authorities with the highest levels of social deprivation,
to ensure that those children in most need receive help first.
To this end, £5 million of New Deals for Schools capital
funding has been distributed to the 75 most deprived authorities
in England, enabling pre-schools and nursery settings to develop
integrated early education and childcare places. This strategy
is under continual review and such funding may be made available
to a wider range of authorities in future.
14. Over the 2002-03 and 2003-04 financial
years, we are making £40 million of capital funding available
nationally to local education authorities to develop and extend
local authority nursery facilities in disadvantaged areas. This
is part of the Government's strategy to ensure that physical capacity
does not become a barrier to achieving the target of every three
year old being able to access a free nursery education place by
September 2004. Whilst local education authorities must spend
the capital funding allocated to them on their own buildings,
they may use it enhance or create space on a school site which
could then be made available for the use of settings in the private,
voluntary and independent sectors.
Neighbourhood Nursery Initiative
15. The Department is focusing particularly
on initiatives targeted at our most disadvantaged areas to address
the "childcare gap" that exists between provision in
those areas and the more affluent neighbourhoods. The Spending
Review 2002 clearly reflects our commitment to expanding childcare
services to help strengthen those disadvantaged communities.
16. Much of our increased childcare funding
is currently supporting our Neighbourhood Childcare Initiative
targeted on the 20 per cent most disadvantaged areas, and other
pockets of disadvantage, across the country.
17. The Neighbourhood Nurseries programme
is a key component of the wider Neighbourhood Childcare Initiative
and was launched in 2001. At £300 million over 3 years to
2004 (£200 million revenue grant/£100 million capital
grant from the New Opportunities Fund), it is the biggest ever
single investment to expand childcare provision, aiming to create
45,000 childcare places in state of the art facilities in the
20 per cent most disadvantaged areas with funding channelled through
local Early Years Development and Childcare Partnerships (EYDCPs).
All Neighbourhood Renewal areas are in the target areas for Neighbourhood
18. Sure Start is an area based initiative
which works with parents-to-be, parents and children to promote
the physical, intellectual and social development of babies and
young children under 4particularly those who are disadvantagedso
that they can flourish at home and when they get to school, and
thereby break the cycle of disadvantage for the current generation
of young children.
19. It does this by setting up local Sure
Start programmes to improve services for families with children
under four and by spreading good practice learned from local programmes
to everyone involved in providing services for young children.
20. £1.4 billion has been allocated
for the first five years of the programme. The 2002 Spending Review
announced funding for 522 programmes, 9 mainstreaming pilots and
50 mini Sure Start programmes in rural areas and pockets of deprivation.
Programmes are funded by revenue and capital grants.
21. One third of children living in poverty
in England live in a Sure Start area. Districts are selected centrally,
based on the DTLR index of Multiple Deprivation. Sure Start areas
are selected locally in response to local needs.
LEA FUNDING SYSTEM
22. In the new funding system, pupils with
additional education needs (AEN) will receive extra funding on
top of the basic entitlement. In order to inform how large this
extra funding should be, and how to identify pupils with AEN,
we commissioned PricewaterhouseCoopers to research into the incidence
of pupils with AEN, and the cost of meeting their needs.
23. On the incidence front, they asked schools
to identify how many pupils had AEN, divided into several categories
essentially covering English as an additional language (EAL) learning
need, specific learning needs, other learning needs and social
needs. There are two outputs from this part of the analysis:
(a) The research showed that the proportion
of pupils with Free School Meals (FSM) and the proportion of pupils
with EAL (as recorded on the Annual School Census) best explained
the variation in reported AEN and hence these indicators should
be used to distribute funding.
(b) That overall, about 25 per cent of pupils
had AEN, although 4 per cent of these covered pupils with specific
learning needs that were generally evenly distributed. This made
21 per cent of pupils with AEN that was not evenly geographically
distributed. Of this, about 5 per cent was EAL related and the
remainder socially related.
24. We have used this data to construct
an index that estimates the proportion of AEN pupils in each LEA.
In two of the options we have included the proportion of children
in families in receipt of the Working Families Tax Credit as a
deprivation indicator alongside Income Support as a wider indicator
of social need.
25. We then need to give each pupil with
AEN an amount of funding. This is derived from PwC's research
into the cost of providing for pupils with AEN. Three types of
costs were recorded:
(a) School Costs: the cost of paying
for additional resources such as learning support assistants,
(b) Opportunity Costs: reflecting
the diversion of resources such as teacher time towards pupils
with AEN in place of support that ideally would be provided by
a learning support assistant or similar person,
(c) Unmet need: the additional support
schools felt that pupils needed but were unable to provide.
26. The first two types of cost can be classified
as "met needs" ie this is the support the school is
currently providing. The second cost is not a financial cost,
but a "cost" to other pupils while the teacher is diverted.
By funding this properly, the teacher is able to focus on the
class teaching. Thus all of our options at least fund AEN at this
27. We then have a policy decision to make
on how to treat the unmet need. Schools indicated that if they
were able to make this provision, the pupils would benefit in
their personal development and also achieve higher standards.
Therefore, some of the current options include the unmet needs,
capped at £1,800.
28. Thus we have two unit costs: one for
just funding met needs and one for funding both the met needs
and a proportion of the unmet needs. These costs reflect the total
money that is spent/need to be spent on deprived pupils. The LEA
funding system is not the only source of funding for these pupils,
thus we need to adjust the unit costs to reflect other sources
of deprivation funding such as Excellence in Cities.
29. Funding the met needs only delivers
£1,150 extra per AEN pupil for 2002-03; funding the met and
unmet needs delivers about £1,700 extra per AEN pupil for
30. Funding of further education is the
responsibility of the Learning and Skills Council (LSC), formerly
the Further Education Funding Council (FEFC). The LSC's national
funding formula includes a supplement (Widening Participation
Factor) to support providers teaching disadvantaged learners with
a view to encouraging and broadening participation. The factor
is based on learners' postcodes. In addition a number of other
groups (those who are: homeless; living in hostels or residential
centres; have mental health problems; travellers; whose statutory
education is interrupted; have recently left care; asylum seekers
and refugees; ex-offenders; full-time carers; recovering from
alcohol or drug dependency; on ESF funded provision; are SRB funded;
or, are basic skills learners) are entitled to this additional
31. The LSC reviewed its disadvantaged funding
methodology earlier this year. The LSC's National Rates Advisory
GroupNRAG (comprising representatives of post-16
learning providers and other organisations) having received an
external research report advised retaining postcodes as the principle
method of identifying disadvantaged populations within formula
funding. NRAG in welcoming the report's recommendations were reassured
that postcodes were thought to be a useful basis for determining
disadvantage. Presently NRAG are reviewing the level of the current
widening participation uplift to determine whether the current
percentage rate is appropriate.
16 ATTENDANCE BY
32. The Education Maintenance Allowance
(EMA) pilot scheme uses assessment of parental income levels to
target support on those young people who may be prevented from
continuing in further education for financial reasons. The pilot
areas were selected to provide information on the greatest possible
impact but also to provide information data from a range of areas
including rural and urban, North and South. Three indicators at
LEA level were used to select specific areas although some areas
were used as control areas for the independent evaluation. These
indicators were deprivation, attainment at 16 and participation
Identifying EMA recipients in the existing pilot
33. Young people have to be resident within
the relevant LEA area. Within pilot areas young people qualify
for an EMA payment on the basis of parental income. A variety
of different schemes are operating to test the effectiveness of
different models. As an example one scheme pays £30 per week
for income levels up to £13,000 pa, tapering to £5 per
week at £30,000 pa. In other schemes the weekly payment,
or the income threshold, or the bonuses may vary.
Identifying EMA recipients in the national scheme
34. The Chancellor of the Exchequer recently
announced that EMAs would be extended across England from 2004.
Young people will therefore be eligible on the basis of family
income and the Department is currently considering the best way
to assess this. One option is to use the Household Income Assessment
being developed by the Inland Revenue for Child Tax and Working
Credits. This approach may offer the most effective way to target
help at those who most need it.
35. The family income may take account of
the household in which the young person is currently living (eg
possibly including a step parent) rather than the natural parents,
one of whom may be absent and not contributing to upkeep. No date
for this change has been agreed. The threshold levels below which
the full EMA is paid, and above which no EMA is paid, following
national roll out in 2004 are still being discussed.
36. The Higher Education Funding Council
for England (HEFCE) allocates funds from DfES to individual colleges.
Funding for widening participation to students from disadvantaged
backgrounds is allocated on the basis of a postcode analysis using
a geodemographic classifier. Neighbourhood types are mapped to
categories of participation in HE, and used to weight the share
of a fixed pot.
37. The allocation is known as the postcode
"premium" although it is in fact a funding supplement
and not a premium. The allocation is designed to help meet the
additional costs associated with recruiting and supporting students
from disadvantaged backgrounds who are currently under-represented
in higher education. It recognises the extra tuition and pastoral
support that students from deprived backgrounds often need.
38. The approach does not take deprivation
into account directly and it relies on an assumption that each
cluster is homogeneous in terms of participation levels.
39. The HEFCE are currently consulting the
sector on changes to the postcode premium, including changing
the basis of funding allocations from postcodes to prior attainment.
The HEFCE have also been consulting on a widening participation
scheme, Partnerships for Progression, and have been considering
how best to target funds between and within regions. Both HEFCE's
plans for Partnership for Progression and for a widening participation
premium are dependent on the outcome of the Spending Review.
40. It is the Department's intention to
continue to use the most appropriate means of identifying and
addressing deprivation. The objective is to deliver services in
the fairest way while recognising the different audiences and
having regard to the administrative costs involved.