Local Government Finance (England) Special Grant Report (No. 96)

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Mr. Timms: I welcome the welcome that has been given to the sums that we are debating. As the hon. Member for Altrincham and Sale, West said, the announcement is a positive one for schools. On his suggestion that there should be a smoother allocation of funds, the trade-off is between simplicity and greater complexity, which would overcome the problem of the cliff edges to which he referred. The great virtue of the system as presented is that it is a simple arrangement; one reason why the money is so welcome to schools is that the arrangements are so simple. In the light of that fact, it would be a mistake to make them more complicated, and I am reluctant to do so, although I take the hon. Gentleman's point about the cliff edges in the system.

The hon. Gentleman said that his suggestion would make the system more predictable, but for many schools it would not. Any school that falls broadly within a band referred to in the report is certain how much money it will receive, which remains unaffected by any variation in pupil numbers. Therefore, for most schools the certainty is greater with that approach than it would be if a change were made whenever the number of pupils rose or fell.

Mr. Brady: I am listening with interest and amusement to the Minister's attempt to justify the Government's approach. First, if the funding regime were per capita, although the total amount of grant payable would not be absolutely predictable, a shift of one, two or five pupils would make only a modest difference to the income of a school, so I do not accept his last point.

The Minister spoke about the virtues of simplicity and predictability in the current arrangements. I refer him to paragraph 4 of annex A part I, which makes it clear that

    ''An initial payment of grant will be made on the basis of the figures stipulated as payable''.

It goes on to state:

    ''Where corrections to the pupil numbers in the authority's schools on 17 January 2002, or to any other data relating to the authority's schools subsequently result in an alteration in the overall

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    level of grant payable to an authority, a further payment of grant will be made or the surplus recovered.''

There is no predictability or certainty within the current arrangements. If the numbers change during a school year, a school may drop from one band to another, with a potential loss of £18,000.

Mr. Timms: If the hon. Gentleman or I were the head or a governor of a primary school with 500 pupils, we would know from this report that we would receive £30,900. If the school had 450 or 550 pupils, we would still know that. I take the point that for a school that happens to be at one of the cliff edges in the banding levels, there is an element of uncertainty. However, for the great majority of schools there is absolute certainty, on the basis of the report. I believe that that is a virtue of the system, and that the heads of the schools affected would agree. I would caution against introducing greater complexity that might appear to benefit some. The complexity of such arrangements is always a matter of great concern to schools. They want us to make them as simple as possible, and that is what we have done with these arrangements.

Mr. Willis: May I help the Minister? As a mathematician he is struggling desperately to justify the unjustifiable. Are the numbers dictated by the form 7 completed in January? If so, why not simply attach a pupil allocation to the form 7 numbers?

Mr. Timms: I do not know whether the numbers are derived from form 7. The date on which the pupil numbers are assessed is set out in the report, as the hon. Member for Altrincham and Sale, West pointed out. We adopted that system because for the great majority of schools it provides greater simplicity and confidence than would alternative arrangements, including those proposed by the hon. Gentleman. The fact that I take that view does not reflect any great degree of mathematical sophistication on my part, but a sober assessment of the facts of the case.

Mr. Willis rose—

Mr. Timms: I will give way, but only one more time, because I need to make some progress.

Mr. Willis: Does the Minister agree that it is much sexier to come up with a global sum such as this for the Chancellor to announce during his pre-Budget or Budget statement than it would be to use a per capita calculation?

Mr. Timms: Personally, I am more interested in simplicity than sexiness—and it is on the basis of its simplicity that I commend this arrangement to the Committee.

The hon. Gentleman also pressed me on the implications for schools of the changes to employers' national insurance contributions. That is something of a red herring, because those changes will not occur until next financial year, whereas the grant that we are debating today will be paid in the present financial year. That was a good try on his part, but it was not relevant to our debate.

Mr. Brady: If I may assist the Minister to make what he is saying precisely relevant to our debate, I shall remind him that I also pressed him on whether

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the sums in the report would be guaranteed at the current level and at the current rate of annual increase year on year. That is precisely germane to the huge cost that schools will face next April.

Mr. Timms: I was coming to that point. We plan to proceed in essentially the same way for next year; the grant will again be uprated by 2.75 per cent., which is consistent with what we said previously. Of course, when we come to the following spending review, it will depend on the changes being made more widely to education spending; that was the subject of another question, which I shall deal with in a moment. For next year, however, working from the figures and the increase of 2.75 per cent., schools can be confident about their position.

The hon. Member for Harrogate and Knaresborough asked about the new funding system. We shall introduce a new funding system for the next financial year. We expect to publish the conclusions of the education funding strategy working group within a few weeks, setting out in a little more detail the structure of the system, although the excitement will begin only when the Chancellor announces his spending review in the summer. People will then be able to put numbers into that structure. We want as much as possible to be included in the new formula—a point that the hon. Gentleman rightly raised. We want the formula to be clearer and simpler—and, I hope, fairer—than the present formula. It is important that as much funding as possible is covered by it. Whether anything more is needed will be announced in due course, but we aim for as much as possible to be included, once the formula is published.

The hon. Member for Altrincham and Sale, West asked how much of the grant came under each of the three categories. For those few members of the Committee who have not followed the argument, I shall take the opportunity to explain in a little more detail how the figures in annex A part II were arrived at. The post-16 support grant has two purposes. My hon. Friend the Member for South Derbyshire (Mr. Todd) referred to one. First, it aims to ensure that, once the Learning and Skills Council allocation has been deducted, LEAs will have a residual post-16 standard spending assessment at least equal to 7.5 per cent. of their overall post-16 SSA. Secondly—this is the point that my hon. Friend referred to—it will guarantee that at least 85 per cent. of the increase in an authority's education SSA will be available for purposes other than the increase in sixth form funding compared with the real-terms guarantee for its schools. Grant paid on that basis is referred to in the report as category 1 grant, and just under £18 million of the total is in that category.

Mr. Brady: Can the Minister tell us what amounts fall under categories 1(a) and 1(b)?

Mr. Timms: I cannot; I suspect that it will probably not be possible to distinguish between the two, because some authorities will be eligible for the money under either category. We shall have to lump them together. There is £2 million under category 2, following the adjustments up to 7 March, and category 3 allows for other adjustments over the year. Of course, we do not

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yet know what those will be, so I cannot say what that figure will be.

Mr. Brady: The Minister has been helpful regarding categories 1 and 2. I understand that he cannot give a final figure for category 3, but presumably, for planning purposes, the Department has some estimate of the total. Perhaps he will enlighten us on that.

Mr. Timms: I can say only that I would not expect it to be substantially more than the amount for category 2, but we do not have a figure at the moment.

The hon. Member for Harrogate and Knaresborough welcomes the contribution of my hon. Friend the Member for South Derbyshire, as I do. Let me apologise to my hon. Friend without delay for the fact that he has not received a response to his letter. I will ensure that that is put right quickly, and I regret that it has not already been done. It is not the case that Derbyshire LEA, or any other LEA, lost money in the exercise. I am not splitting hairs, but there may be some confusion. As part of the process, a larger sum has gone to sixth forms in Derbyshire and that has been taken out of Derbyshire's SSA, which means that schools other than sixth forms have less money than would otherwise be the case.

Mr. Todd: Correct.

Mr. Timms: I am grateful to my hon. Friend for assenting to that proposition. It is not the case that Derbyshire has lost out under the arrangement; the split between the two has changed.

We have attempted to ensure in the formula that those authorities that experience proportionately the greatest variation are protected by special grant. Inevitably, there is a cut-off in such operations, and we chose the proportion of 85 per cent. My hon. Friend has drawn my attention to his concerns about that, and I am pleased to hear that Derbyshire has managed the transition without too much difficulty. However, I am aware that there have been concerns in Derbyshire and in other LEAs.

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