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School Funding (Guildford)

Sue Doughty (Guildford) (LD): I am most grateful for the opportunity to put to the Minister some of the problems in schools in the Guildford area. I pay tribute to the schools in my constituency. Each and every one has dedicated, strongly committed staff who deliver good education. The problem is that good schools are faced with difficulties in meeting the Government's financial controls and in dealing with their impact. I believe that the Government still fail to recognise the problems caused by the funding crisis of 2003–04, which has continued into the following year.

We are not a poor area, but low funding is causing major difficulties in meeting the requirements set by the Government. We run the risk of undoing good work, which the Government asked of our schools and which they worked so hard to deliver. Locally, the high cost of living, of which the Minister is well aware, is producing recruitment and retention challenges and driving up costs, as is the proximity to London schools, where teachers qualify for an extra £2,000 in allowances.

In Guildford, new teachers do not start at the bottom of the pay scale, as that would make it impossible to recruit. The problem of the bottom of the scale was ignored by the Government in their financial plans. Like schools across the country, the schools in my constituency were forced to plan for deficit budgets and cuts in staffing. More than 80 per cent. of Surrey schools project in-year deficits for 2003–04, and a sample survey by Surrey showed that 125 full-time equivalent posts have been lost.

The impact on total balances for schools in Surrey is a projected reduction of £12 million, which would bring balances down to about £3 million. That is unsustainable.

Mr. Nick Hawkins (Surrey Heath) (Con): As the hon. Lady is aware, the southern part of my constituency is also in Guildford borough. I share her concerns, expressed on behalf of local schools, including the very successful Ash Manor secondary school, whose headmaster, Bob Linnell, is one of the leaders of secondary heads in Surrey. All of us in Surrey have had the problems that she talks about. Does she agree that local education authorities such as Surrey county council, which is well led by Dr. Paul Gray, are doing an excellent job in trying to support schools, despite the difficulty caused by the lack of funding from the Labour Government?

Sue Doughty : I thank the hon. Gentleman for his intervention. I have no problem in agreeing with him about the excellent work that is done by the department and by the director of education and children's services. However, it is like pushing rocks uphill.

The precise impact of next year's formula settlement is not known but it is expected to increase the budget by about 5 per cent. There will be the protection of a 4 per cent. minimum per pupil funding guarantee and the Government have diverted additional funding to education, so the 2004–05 settlement will produce between 1 per cent. and 1.5 per cent. of additional resources above inflation. That will translate into an

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additional £3.5 million to £5 million maximum in the Surrey schools' funding pot. It means that a minority of schools that successfully balance their budgets in 2003–04 may have a real terms increase, but it is insufficient to tackle the cost pressures that resulted in the cull of £12 million from balances.

The county council is facing growing pressures across all services. Demographic changes in adult services such as those for older people are resulting in the need for further care packages and independent care, the cost of which I have raised before in the House.

Children's social care is getting more expensive because there are increasing numbers of looked-after children and a lack of foster carers, and high council tax rises to pay for it are not an option. The scope for the county council to find additional funding for schools is therefore severely restricted in 2004–05. The Department for Education and Skills has acknowledged its responsibility for the funding crisis of 2003–04, but it concedes only to having moved too fast in its reforms, which gives us no real hope of change, especially in the hard-pressed local authority.

New regulations restrict the budget increase that local education authorities can make to centrally managed school functions, such as those involving the education of pupils with special educational needs and early-years education. Pressures on those budgets are immense following new statutory duties placed on local education authorities for the education of sick children, for example, and the rising cost of placements for pupils in independent and out-of-county settings. In my constituency surgeries, I regularly meet families who are desperate to get the right education for their children, for whom there is no decent funding. Will the Minister tell me where the money is supposed to come from to provide fair treatment for the disadvantaged?

The Government responded to the crisis by adopting a stability-before-equity policy for 2004–05 funding and are seeking to target funding to schools and LEAs in difficulty. Surrey did not qualify for transitional support grant, so that was one opportunity gone. The second approach suggested by the Government was for Surrey to target additional funding to schools in financial difficulty from within its total schools budget, which top-slices the funding for all other schools. Surrey consulted its schools forum and decided not to undertake targeted funding in 2003–04, as more than 80 per cent. are predicting in-year deficits. There is no room to achieve stability before equity.

Despite Government reassurances, schools in my constituency are facing considerable challenges, which will not be fully funded—for example, work force reform and teachers' upper pay scale 3. Problems have already been caused by UPS2 being funded at only 60 per cent., and UPS3 is around the corner. Again, the Government have made reassuring sounds but they have no clarity. Will the Minister tell me whether the Government are going to fund UPS3 in full, or, if not, how much of it they will fund? In the race for funding, we know that Surrey is never going to be a major winner.

In 2003–04, the Department encouraged local authorities to license school deficits and to approve the use of formula capital for ongoing running costs, but in recent months there has been a noticeable change in approach, with heads' ability to manage school budgets

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being called into question by the Department and the introduction of training for school managers in running schools with declining funds. In Surrey, those managers have been doing a tough job for years. Does the Minister really believe that the shortfall in funding is coming from poor management?

In view of external audit concerns regarding the low projected level of schools' balances, the county is seeking in-year balance budgets from schools in 2004–05. It is a hardline approach. It appears that there is a lack of recognition of the difficulty that that will bring to many schools. Surrey has had to recognise the concerns of some heads that, if they make difficult decisions, they may end up subsidising the schools that cannot. A deficit in any school could ultimately result in the top-slicing of all schools' budgets, either to write off a deficit if a school has to close, or in response to departmental targeting requirements.

Schools are taking a deep interest in this debate and many have been in touch with me. They point out other aspects of their experience. A chair of governors has pointed out that they are performing a management skill. They are eking out the money. They are spending the time. We are paying school managers to spend their time finding savings here and extra money there. We are investing merely to try to plug the gaps. Our heads expect to manage, but spend a disproportionate amount of time on trying to balance books. Managing a deficit budget is a headache and one for which there is little remedy.

A local head said to me:

He has cut back wherever he can. He has cut back on his plans for improving the schools. He is scraping even to get on with basic repairs and emergency repairs. Now his only hope is to lose a specialist music teacher. I should like the Minister to see the music work that is done at that school to understand the loss that that would be.

We have the problem that as teachers and teaching assistants move up the experience scale they get more expensive. The Minister is aware of our problems in retaining teachers. We want to retain these people. We have got to the stage in Surrey where as teaching assistants move up the salary scale they have to take a drop in hours if the books are to be balanced. As teachers move up the pay scale, more money is needed and they have no idea what will happen when teachers reach the top.

Decisions have to be based on finance and not on educational reasons. The chair of governors of a school that had a really good Ofsted report wrote to me:

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He also points that school governors are volunteers who become governors in order to run an efficient school to the benefit of the community. They are there to serve the community and the school and not just to wield the knife on behalf of the Government.

Ewhurst school in my constituency has no staff room for non-contact time for its teachers. It is not acceptable that, in this day and age, teachers spend non-contact time on a bench in a kitchenette. St. Thomas of Canterbury school is spending 91 per cent. of its budget on salaries, in common with many other schools that are way above the guidelines for salary spend. The recommended level is 80 per cent., but only three schools in the whole of Surrey have gone below that figure. When we reach 90 per cent. on pay and pay costs, the situation is desperate.

Money for in-service training is a joke in our schools, yet they, like others, need to plan for refurbishment. Schools need to make improvements. They need to spend on information, communications and technology. The schools can raise funds, but that is such a distraction from their core business of teaching kids.

Mr. Hawkins : Does the hon. Lady agree that, when she meets the heads of schools in the primary sector, one of their main worries, in addition to the shortage of funds to which she correctly referred, is the immense burden placed on heads, teachers and governors—especially on heads and governors—just to deal with the huge tide of paperwork, circulars and ring binders full of advice that they have statutory obligations to read, which churn out of the Minister's Department? Each head whom I have met during the past seven years has said that the burden is enormous and that the huge tide of paper coming from the Labour Government must be stopped.

Sue Doughty : I thank the hon. Gentleman for his intervention. It is right to pay tribute to the people who are handling such enormous problems. It is way beyond what they signed up to, what they wanted to give their personal commitment to and put their lives into—the service of our communities and schools.

I draw the Minister's attention to the problems experienced by infant schools. They face a further hurdle. Children are not funded for full-time places until the term in which they are five years old. Schools must find the money for spring and summer-borns who are in full-time school before their fifth birthday. Will the Minister consider such discrimination in infant schools?

I wish to highlight a further comment by a Guildford head teacher, because our governors and teachers tell the same story. In a long letter to me, he said:

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In my closing remarks, I want to go back to the budget. Guildford is an economic powerhouse. As a nation, we need our kids to do well. As an MP, I want them to do well. We need them to thrive and to pay taxes to support the education system for the benefit of the country as a whole. Guildford is an area of investment for this country but my schools are being forced to go backwards against all the improvements that we have seen in education. We do not want gold plating. We just want fair treatment. Will the Minister promise to take the situation far more seriously?

4.14 pm

The Minister for School Standards (Mr. David Miliband): It is a pleasure to serve under your beneficent chairmanship again, Mr. Deputy Speaker.

I have discovered that hon. Members take two approaches to such debates. One is to seek out common ground, present a fair balance of the facts and find a sensible way forward. The alternative is to paint a picture of disaster and desolation and to try to impress on the audience the gravity of the situation, thereby achieving action. In my experience, the first approach is far more likely to be effective than the second. I am sorry that the hon. Member for Guildford (Sue Doughty) chose to paint such a black picture of the situation in Surrey.

I am pleased to have the opportunity to return to the issue of education funding in Surrey. I had a useful meeting with the hon. Member for Surrey Heath (Mr. Hawkins) and his colleagues, although unfortunately the hon. Member for Guildford was not able to attend. I understand that there have also been Adjournment debates on the subject, which were responded to by the Under-Secretary of State for Education and Skills, my hon. Friend the Member for Enfield, Southgate (Mr. Twigg).

One harmonious note from the hon. Member for Guildford was her word of congratulation in the first few seconds of her speech for the hard work done by teachers and pupils in Surrey. I am pleased to say that when she speaks of the hard work done by teachers, we can point to the increased number of teachers in Surrey. In 2003, there were 7,660 compared with 7,220 in January 1997. That is an extra 440 teachers, which is an increase of about 6 per cent. I am pleased that they have joined their 7,000 colleagues in working hard on behalf of local pupils.

Over the same period, the number of school support staff working in the county rose from 3,280 to 4,620. I am surprised that the hon. Lady was not able to refer to those statistics while painting her picture of the situation

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in the Surrey local education authority area. She might also have pointed out that the teacher vacancy rate is 1.1 per cent. I am happy to put on record my gratitude to the hard-working teachers and school leaders who have delivered significant improvements in education in Surrey.

In a non-partisan fashion, it is also important to place it on the record that the achievement of Surrey pupils in some ways reflects the high priority that Surrey county council puts on education, which was noted by Ofsted at the time of its last inspection. I shall address the funding challenges, but it is significant that results across all key stages in Surrey consistently exceed national averages, and the recently introduced comprehensive performance assessment mirrors that situation.

With regard to central Government funding, out of 150 authorities, Surrey is the 65th most generously funded. Between 1997–98 and 2004–05, our estimate is that Surrey's funding per pupil has increased in real terms from £2,820 to £3,540 per year. That is an increase of about £710, or 25 per cent. in real terms, or about £1,000 in cash terms. That does not include capital investment, to which the hon. Lady briefly referred. In 1996–97, capital funding in Surrey was £8.5 million. In 1997–98 it was £11.7 million, and by this year it was £49.3 million.

The system for devolving funds from the Department for Education and Skills to local education authorities works on the basis that we calculate the number of pupils, give top-ups to reflect extra need—for example, to account for pupils whose families are on income support or the working families tax credit—and then, where appropriate, recognise additional costs. Surrey is 146th out of 150 authorities in respect of percentage of pupils from families on income support and percentage of pupils from families in low-wage employment. Surrey is a prosperous county, although it has areas of deprivation that need to be targeted by the local formula chosen by local government.

The hon. Lady knows that responsibility for funding schools is shared between central Government and local government. Both raise funds for education, and both have formulas for the distribution of those funds. The Government's money goes to the local education authority, which then has a formula for its distribution to schools. If the hon. Lady has concerns about how deprivation in her constituency is recognised in Surrey local education authority's funding formula, she should take them up with the authority.

Mr. Hawkins : First, I am glad that the Minister paid tribute to what Surrey local education authority has done. I declare a personal interest, because my wife, Jenny, was vice-chairman of Surrey county council's education committee until 2001. I pay tribute to the work that she and her colleagues did, and that their successors have continued to do.

In the meeting that other Surrey colleagues and I had with the Minister, he recognised that Surrey has always passported on to schools more than the Government recommend in respect of central Government funding. That is a proud record. Does he not recognise that teachers get frustrated that the extra bureaucracy is taking up so much of their time and money?

Mr. Miliband : The hon. Gentleman was doing well until his last sentence. The passporting by Surrey has

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met the basis set by the Government, but I was referring to the formula by which Surrey local education authority gives out money to different schools. In a large authority, that is obviously important. His allegation that the money is somehow swallowed in bureaucracy is belied by the fact that there are more teachers and support staff, all of whom are being paid more. That is the obvious explanation of where the money has gone. I thought he was going to refer to problems that he raised at the meeting, which are worth discussing.

Sue Doughty : I want to make a couple of points of clarification. I was surprised to hear the Minister say that I was not with my county colleagues at the meeting with him. I seem to remember that I was there. I see my Surrey colleague, the hon. Member for Surrey Heath, agreeing.

We are talking about the funding formula, and I hope that the Minister will address the overall situation. He will have heard me pay tribute to the schools, their excellent work and the improvements that they made at the Government's request. However, we have not addressed issues of deprivation. We are trying to sort out the Government's end of the formula, so I would be grateful if the Minister built on his discussions with me and my Surrey colleagues and addressed those points.

Mr. Miliband : If the hon. Lady says she was at the meeting, I do not doubt it. My notes said that she was not, but I am terribly sorry if I have misled the House and obviously I do not deny her memory of it.

In the summer, the Secretary of State set out the principles he would follow to restore confidence in the school funding system, and in late October he made an announcement on the approach that we are taking. He set out for the first time a guaranteed minimum increase in the budget of every school throughout the country, which will be 4 per cent. per pupil in 2004–05. The guarantee takes account of the unavoidable standstill cost pressures on school budgets, which we, with the National Association of Head Teachers and other teacher organisations, estimate to be 3.4 per cent. That is the first bit of headroom.

The hon. Lady said that she does not know what the increases are for Surrey next year. It is public knowledge that we have ensured that every local education authority will receive a guaranteed minimum funding increase of 5 per cent. per pupil, and Surrey's increase is above the average at 6.3 per cent. That gives further headroom for the authority. In addition, there is a package of transitional support for those authorities that had the lowest increase in 2003–04 and 2004–05.

We also discussed in our meeting the fact that certain schools have been hit hard by changes to the standards fund. The devolution of responsibility for the fund to local budgets was seen as good in theory on both sides of the House. It was urged on us by local government, but in practice it created particular problems in individual schools. The standstill that has been guaranteed for 2004–05 and 2005–06 in the operation of the standards fund gives welcome stability. Unlike the hon. Lady, I do not believe that that will be at the expense of equity. The standards fund is used on the basis of need, and it is right that we keep those funds for the next two years.

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It is important that LEAs play their part in the process of delivering funding to schools, the passporting that the hon. Member for Surrey Heath mentioned and the attempts to limit central spend outside the individual schools budget so that the money goes through to the front line and resources are targeted to ensure that every school is helped to financial sustainability over the medium term.

Hon. Members should also remember the Chancellor's announcement of 10 December, which had a significant impact on school funding. He announced a further £317 million in the revenue support grant for 2004–05 for local authorities with education and social services functions. That is on top of the increases already announced in the provisional settlement. In the case of Surrey, the additional grant amounts to £7.3 million. That means that in 2004–05 the grant from central Government to Surrey county council will rise by 7.7 per cent., which is well above the rate of inflation.

The hon. Member for Guildford mentioned the fact that Surrey faces recruitment challenges because of its proximity to Greater London, and I do not deny that. Pay is not the only factor influencing teachers' decisions, but I was interested in her remark that the stability and experience of the Surrey teaching force mean that they have higher salaries. She will also know that newer staff have the fastest increase in salary on the main pay scale. Their salary rises once a year and those increases are worth between £1,000 and £1,500 an increment. On the upper pay scale, increases occur every two years. She is right to refer to the upper pay spine and I will refer to it briefly in a moment.

The funding formula that we have put in place is designed to be objective and reflect the relative needs of Surrey compared with those of other authorities. It tries to strike a proper balance between the basic funding and the top-ups that I referred to. The hon. Lady knows that Surrey benefits from additional funding through the area cost adjustment, which helps authorities with the highest staff recruitment and retention costs. Surrey's ACA factor is higher than that for those outer London authorities to the east of central London, but just below that for those to the west of central London. I am sure we could debate the size of that ACA—the hon. Lady may believe it should be bigger to reflect the recruitment challenges in Surrey—but I hope she recognises that it exists in the context of the current formula.

The hon. Lady also mentioned the work force agreement, and this academic year is the first year of its operation. Teachers will be relieved of the 24 administrative tasks, which will be passed on to teaching assistants. Next year, there will be a limit in respect of 38-hour cover and in 2005–06 there will be a limit of 10 per cent. in respect of preparation, planning and assessment time.

We have made it clear—most teacher organisations would support this—that work force reform involves the use of the whole budget, not just a marginal part. Our responsibility is to ensure that every school has the headroom to make the necessary changes to deliver on the higher standards that we believe will follow from helping teachers to focus on teaching and giving them

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support staff. I hope that I have addressed all the issues in the 30 minutes available for the debate.

Sue Doughty : I thank the Minister, but I am a little concerned about his remarks on headroom. We have schools operating with more than 90 per cent. of their budget going on staffing. How much headroom does he think there is?

Mr. Miliband : Headroom refers to the difference between the increase in costs and the increase in budget, both of an LEA and an individual school. The increase in the budget of an individual school is a matter for the LEA. We distribute money to the LEA, but its formula determines what the increase will be for individual schools.

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Some people believe that there should be a national funding formula and that the famed powers of competence and sagacity of the Department for Education and Skills should be used to distribute funds to 24,000 schools across the country. That is not the Government's position. We believe that the constitutional settlement that gives an important role to local government—people who are closer to the front line than those in Whitehall—is right. That constitutional settlement demands that LEAs make a judgment about how to distribute money, thereby determining the headroom available to each school in its area.

Question put and agreed to.

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