Examination of Witnesses (Questions 1-19)
MR DAVID
NORMINGTON, DR
RUTH THOMPSON
AND MR
STEPHEN CROWNE
25 JUNE 2003
Q1 Chairman: Can I welcome you to
our deliberations. It is some time since we saw you, and I am
sure you are quite pleased about that. This is the annual meeting
that we have with officials in the Department. I think it is the
second time you have fulfilled this role. Can I welcome you and
say that I think it is an improved system, where we give you a
much better indication of what we are going to focus on during
this hearing. It came out of a very good discourse we had with
your predecessor, Sir Michael Bichard, and we agreed that that
would be a more effective use of our time and yours. This has
been a pretty turbulent time for the Department, and one would
have thought, if you had been a private sector company, your Chairman
might be saying to you, if you were the Chief Executive, David,
that you might want to consider your position. Word on the street
was that ministers—and this Committee normally believes
very much in ministerial responsibility—were not very well
informed about the knock-on effects, the implications, of the
changes to school funding this year. They are quite serious allegations
that ministers were not given the fullest information they could
have had. How do you react to that allegation?
Mr Normington: I think we tried
to do all the usual work you do in what is a very turbulent period
in school funding, and I think we provided a lot of that advice
to ministers. Neither we nor ministers believed that it would
have this impact on some schools. I actually think the work we
did in the Department and provided to ministers was very good
work, but in the end, we did not get right the very wide impact
on schools, the very different impact on different schools, even
in the same area. Ministers themselves must speak as to whether
they had the best advice or not. I think we did a good job, but
at the final point, we did not believe it would have the impact
that it did, so there were mistakes.
Q2 Chairman: With great respect,
you say you did a good job. I was very impressed by the memorandum
that you sent us, and on page 25 I find this almost breathtakingly
frank answer to the letter that we sent you: "Reasons for
problems in 2003-04".[4]
When you wrote this, presumably this was not the sort of information
that you had to hand for ministers during the period when the
problems started to arise. This is all hindsight.
Mr Normington: Some of it is hindsight,
because we did not know, as I have admitted, precisely what the
effects would be on individual schools. It was very difficult
to model that, but at the beginning of this process, we did have
a very good fix on how the changes we were making to the local
authority funding formula would impact differentially on local
authorities. We did have that, and the evidence of that is, of
course, that we put in floors and ceilings, so that the effect
was not as extreme as it would otherwise have been. Secondly,
we did know very well what the costs that schools were facing
would be, and we were able to model that. We also knew that some
standards fund grants were ending and some standards fund grants
were being transferred into the local authority settlement. What
we were not able to do was to model the total impact of that on
every school, because, as the memorandum says, there are decisions
being taken at each level—some by us, some by local authorities,
some by schools—which makes it virtually impossible for
us to model what the impact will be on every individual school.
We did not believe that the impact on individual schools would
be as different across the piece as it has been. Some are big
gainers, and some are losers, and of course, we have been hearing
from the losers, who have real problems. It was that bit of it,
the modelling of the impact on schools, that we were not able
to do, so we were not able to provide that to ministers. Overall,
in the national settlement, we believed there was enough money
to cover all the demands, but of course, as it spreads out, as
the memorandum shows, the differential impact, first on local
authorities and then on schools, was very wide.
Q3 Chairman: Are you saying you did
model but not well, or you did not model at all, or it was impossible
to model?
Mr Normington: We did model the
impact on local authorities. What we were not able to do was to
model the impact on individual schools, because the decisions
on how to allocate money to schools are taken at local authority
level.
Q4 Chairman: At the moment we constantly
hear that the Government does not trust local education authorities
a great deal, and there is this increasing determination from
where we sit that the Department has to directly fund schools
more closely, but here you are admitting that it is very, very
difficult to do, which is the simple allocation, or the complex
allocation of school finance directly to thousands of schools.
Mr Normington: No, I am saying
that in the present system local authorities have a great deal
of discretion in how to allocate money to schools. Each of them
has a local funding formula, and under that formula they decide
how the money should be allocated. They also decide themselves
whether to put the amount of money that we think should go into
schools into schools, and what to put in from the Council Tax.
So there is quite a lot of local discretion in the system. I am
saying that in that system, it is inevitable, since we do not
fund schools directly, that we will not be able to model the impact
of the present system on every school.
Q5 Ms Munn: On that point specifically,
my Director of Education in Sheffield told me that he was
concerned at the outset of the likely implications, particularly
of the standards fund changes, and he actually offered to model
the changes school by school from within Sheffield to the Department.
That was not taken up. We were also told by the LGA last week
that they offered to model. Why were those offers not taken up?
That would have given, at least in one authority, an idea of the
kind of impact there might have been.
Mr Normington: I did not know
about the Sheffield case. I do not know who made that offer. To
begin with, we did not think it was going to have this effect,
and by the sound of it, we should have taken up that offer because
it would have given us earlier information. I did not know that
it had been made.
Q6 Ms Munn: That is not something
you have routinely done before?
Mr Normington: We do work very
closely with local education authorities, contrary to the popular
view, and we are still working with them now, but there are 150
of them, and it is the local authority's responsibility to decide
how much money to put into education, and to decide how to allocate
that to schools. That is the system we have.
Q7 Ms Munn: What you have just said
was that it was impossible for you on your own, which I accept,
to model what was going to happen to individual schools. So you
are saying one of two things: that you do not think it is your
responsibility to do that because it is up to the local education
authorities, or that you did not know that you could have done
that, and it would have been a good idea to do that, certainly
in hindsight, because we know that what has happened has not been
good.
Mr Normington: With hindsight,
we could have done with a lot more information from local authorities
about what the impact would be. I accept that. I have to say that
most local authorities would not have been able to tell us what
the impact was going to be until very late in the process, probably
into the financial year. Even now, some local authorities have
not allocated all the money to schools that is available, and
are still trying to deal with the problems of individual schools.
So this process of allocating budgets locally goes on through
the end of the financial year into the new financial year. Before
somebody says this to me, that is partly because the settlement
came through to local authorities very late, and that is something
we have to deal with too. One of the problems with the whole system
is it is very late. We do not get the school teachers' pay settlement
until very late, and that has to be modelled into this equation
as well. It would be desirable if we could get to a position where
we had longer term settlements and we could have the information
about the costs earlier.
Q8 Chairman: There are some very
good, gold-plated excuses coming out here. I want to take you
back to what you said just now. You said in answer to Meg Munn
that it is up to local education authorities to make decisions.
In Essex and Barnet, what you decided left them with no money
for anything else. Barnet and Essex found themselves in the position
of being expected to passport more additional resources to education
than their overall formula grant increase. Are you telling me
that in only 150 local education authorities no-one in the Department
of Education could see the horrendous effect on two major authorities?
Mr Normington: With local authorities
where there are those effects, we do have discussions, and if
we did not, they would be straight on to us. Barnet is an authority
we have had a lot of discussion with over this period, because
they are in a particular difficulty, as are their schools. So
yes, we are talking to local authorities that are in a particular
position, and we particularly talk to those where the impact of
what we were saying nationally was having a particular effect
in the local authority area. Barnet is one, but there are others.
Essex is one too.
Q9 Chairman: There are others?
Mr Normington: There are some
others.
Q10 Mr Turner: Can we go back a step?
As I recall, the SSA was defined as the level of spending which
is required to produce a standard level of service. What is the
equivalent definition of FSS?
Mr Normington: I am not sure I
know. The formula is based on a number of things. It is based
on the number of pupils. It is based on the assessment of what
extra it costs to educate a pupil in an area of deprivation, and
it takes into account other cost factors, often to do with the
differential costs of employing teachers. It has not changed fundamentally.
We are still trying to get to a position of what it costs to educate
a pupil in a deprived area, or in an area where there are additional
costs, perhaps because it is a rural area or it is in London and
the South East, where teachers' pay is higher.
Q11 Mr Turner: Your Department's
view is that it is a formula which is calculated to reflect the
needs of a particular area?
Mr Normington: Broadly, yes, although
in the work that was done we did not carry through into the final
settlement every element of need that was identified by PriceWaterhouse
Coopers. That would have made it impossible. Its impact would
have been too different.
Q12 Mr Turner: Does the ODPM share
that definition?
Mr Normington: It was worked out
with their involvement, so I think so.
Q13 Mr Turner: You say the process
involved local education authorities. Was it legally possible,
or certainly practicable, for a local education authority to amend
its funding formula between the point at which there was a reasonable
indication of the availability of resource and the point at which
they had to provide budgets for schools?
Mr Normington: I think the time
issue meant that it was probably not practicable.
Mr Crowne: The position in most
authorities is that a fundamental change to the local distribution
formula would have required an extensive period of consultation,
but a lot of formulae give the local authority the ability to
deal with unforeseen circumstances, and there are contingency
arrangements. In fact, what we have seen over the last couple
of months is local authorities, working very hard in partnership
with their schools, to use the flexibility already within the
system. Clearly, as we look forward to next year, we have to ensure
that there is the right balance of flexibility and clarity in
those formulae to make the whole system more predictable and reduce
the amount of turbulence.
Q14 Mr Turner: So when you say you
are not able to model the total impact because decisions are taken
at different levels, in practice, you could have known what the
funding formula was for each local education authority at the
time when the modelling was undertaken.
Mr Normington: Yes, but it does
not tell you how the money is going to be distributed to schools.
Mr Crowne: A lot of the operation
of a local formula depends on local data about pupil numbers,
distribution of children with special educational needs and free
school meals, and that is information that is collected in real
time as we go through the year, and it is not possible for us
to have that data in advance to work through the implications
for every school. A lot of that information is collected in January
and the following months.
Q15 Mr Turner: You have both mentioned
the timing. What sort of timing would have been required to ensure
that schools did not go through the turbulence and crises and
concern about threats of redundancies and so on that have emerged
since 1 April?
Mr Normington: They need to know
sooner. They need to know in the autumn. There is quite a long
budget-setting process, as you know, in local authorities, which
will often go on right through to March, so ideally, they would
need to know from us before Christmas and earlier if possible.
Q16 Mr Turner: Have you never tried
to tweak the system so that this information becomes available?
Mr Normington: We have tried to
provide the information earlier. I do not know precisely when,
but it was very late this year. I say again, of course, some of
the cost pressures also came through very late, like the teachers'
pay settlement; we do not get that until the end of January, and
that is a major factor in school budgets. I think we would like
to move to a position where there were longer term pay settlements
so that if possible, there was more certainty about cost questions.
We could do with moving the whole system forward to earlier in
the year.
Q17 Ms Munn: Given that you knew
that there were going to be these changes, and you said earlier
that you work closely with local education authorities, how much
advice was given about the fact that there were going to be these
sort of changes and that there were going to be quite significant
impacts?
Mr Normington: The basic change
to the way in which local authorities' funding was distributed
was worked out with a lot of local authority involvement.
It is quite an open process, and there was a lot of joint working
with them. Of course, a lot of the discussion was about the impact.
There were lots of different models done. Lots of impacts were
modelled on local authorities. There were lots of discussions
about that, but it was all particularly about the impact of the
distribution system at the local authority level. We had said
that we were going to end some of the central grants in the standards
fund, which is a general principle a lot of people approve of,
because there are too many funding streams. If you wanted to look
at one reason why some schools were particularly badly hit, it
is because of the ending of those grants, which were distributed
in a completely different way from the normal local authority
formula. Although everybody knew that that was happening, we were
not able to model the impact of that on top of the changes we
were making to the local authority settlement. We still have this.
When you hear particular schools saying they are in difficulties,
it is often because of the impact of the loss of grant on top
of other things. We are still working with some local authorities
on that issue, and some local authorities are trying to mitigate
the impact of that with our support.
Q18 Ms Munn: That is certainly the
case in my own authority. What I am interested in getting a bit
clearer is not just your working relationship with local education
authorities, which you have described to us, but the relationship
in terms of the expectation about how directive the DfES is about
money. There is the whole issue of passporting, and also, how
much involvement in terms of direction or guidance or advice does
the DfES give to local education authorities? What are the expectations
about how they go about constructing their own formulae for distribution
in the local areas?
Mr Normington: Stephen may want
to add some detail to this. There are two things. One is that
we do put strong encouragement into the system that the money
we think should be spent on education is passported to education.
Successive Secretaries of State have put a lot of effort into
that, and we do have now a fallback legal power to enable us to
intervene if we think the school budget has been set too low.
We did not use that in the end, but we did consider using it in
two cases. In that sense, there is a lot of emphasis on saying
the money for education should be spent on education. We do also,
of course, set some basic rules about the nature of the local
formula, particularly about its relationship to the number of
pupils. In that sense, we are setting the framework.
Mr Crowne: The principles of fair
funding are clearly laid out and have been agreed with the local
authority partners. There is a good deal of flexibility available
to local authorities as to how the formula operates, and that
is quite deliberate, because it is a recognition that local circumstances
vary, and there should be the opportunity to configure these arrangements
to those local circumstances.
Mr Normington: Another thing we
have done over recent years is try to reduce the amount spent
on administration by setting levels by which we wanted central
administration costs reduced. I think local authorities would
say we have been quite directive in some areas.
Q19 Ms Munn: Do you think that the
whole idea of looking at it from a national perspective is too
broad-brush to take account of local employment costs? I am thinking
that schools now are much more entities which employ all sorts
of professionals, not just teachers; teachers were always seen
as being the bulk of that, but with workforce remodelling, we
are seeing an increasing number of other people coming in, and
their pay rates will be much more variable than the teachers'
rate. Do you think it is too broad-brush to reflect those differences?
Mr Normington: It is difficult
to get a national formula which reflects all those different local
factors. It is true, particularly in support staff, that although
there is a national agreement, pay rates vary locally quite a
lot. That is the schools' flexibility, or lack of it, depending
on what their employment costs are. We have tried, in the work
we did to develop the most recent formula, to get a better basis
for estimating staff costs, and they are reflected in the formula,
but by definition, the national formula has to be moderated somewhere,
because if it is not, it will not apply to every school and to
every local authority. It cannot.
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