Examination of Witnesses (Questions 80-99)
MR DAVID
NORMINGTON, DR
RUTH THOMPSON
AND MR
STEPHEN CROWNE
25 JUNE 2003
Q80 Mr Chaytor: My question is, would
the new formula not be better and more effective if it was based
on real costs rather than continuing to base it on proxy? What
was the Department's view on this during the negotiations over
the new formula? Does the Department have a view that it should
continue to base it on proxy costs or on real costs?
Mr Normington: It depends what
"real costs" means. If it means we pay for everything
it is spending—clearly you can see why we would not be very
attracted to that.
Q81 Mr Chaytor: It is a real differential.
Are we talking about real differentials?
Mr Normington: Yes. You use average
cost figures, you use averages, and that means that you do, in
a sense, smooth out the effects of those formulae across an area,
but we do try to take account of, for instance Inner London, Outer
London and the South-East, where costs are higher, and actually
try and take into account other costs than just salary. I think
it would be very difficult for it to be precisely based on actual
costs. I do not see how that would work. There was an argument
about this; a lot of the argument was "You should fund activity"
and, as you are saying, you can see why we would not buy that
because that is just an invitation to have activity. What we really
want is outcomes.
Q82 Mr Chaytor: Is it not possible
to establish an agreed level of activity? It is not an impossible
task to do that. I can see the point that the teacher associations
were arguing strongly for an activity-led funding model and that
you were resisting that, but it must be possible to reach agreement,
given all the other issues on which you have reached agreement
with the teacher associations? Why could an agreement not be reached
over activity-led funding?
Mr Crowne: I think it would be
a heroic assumption for us to be able to, as it were, crystallise
a consensus about the activity that should go on in every school
to deliver the outcomes that we want. The fact is that in practice,
the way education is provided, the way schools work, is constantly
developing and changing, and indeed we are encouraging innovation
and encouraging different ways of achieving outcomes. I think
for us to go in with a single model, as it were, driving resource
allocation based on some assumptions about how it should be done,
would be a very—
Q83 Mr Chaytor: The National Curriculum
is an assumption about how it should be done. We have the most
prescriptive curriculum in the western world. It must be possible
to agree the average level of staffing to deliver what is required
by the National Curriculum—leaving aside issues of local
innovations.
Mr Normington: The National Curriculum
actually sets outcome standards. It does not tell you how much
resource you need to spend in a particular place to achieve those
outcomes. What we tried to get to in this current change was a
more accurate assessment of what the costs were of educating different
kinds of pupils within that National Curriculum framework. I think
it is better (and actually I think it is fairer) and it is certainly
more up-to-date because the previous formula was based on 1991.
So we are trying to get to the kind of system you want, but I
think it is, given the variety of factors around the country,
very difficult to go all the way.
Q84 Mr Chaytor: One further point
about the last few years. At some point during the debate about
the funding issue the Government allocated an additional amount
of £28 million. Two questions: first of all, what are the
criteria for the basis of that allocation and, secondly, where
was that money taken from within the Department?
Mr Normington: I will ask Stephen
to deal with the criteria. In fact, in this period we put two
extra amounts of money in: £11 million to Inner London to
cover the pay settlement which meant a big increase in teachers'
pay in London, and £28 million to deal with some of these
problems about how the 3.2% floor was impacting. I will ask Stephen
to explain how we did that. Where did this money come from? Well,
it came from underspend within the Department's budget. All the
time, if we think there is real underspend we are looking to re-allocate
that. So far, £39 million is the underspend in the Department's
budget which we felt it was safe to put in to deal with those
problems.
Q85 Mr Chaytor: Is that the anticipated
underspend for 2003-04 or the real underspend for 2002-03? This
is an identified underspend for the last financial year which
is run forward to this?
Mr Normington: Yes. There is on
the record a figure for the in-year underspend for the Department.
Some of that is simply money committed which is not spent. We
have end-year flexibility and therefore we can try to estimate
what we think is the real level of underspend which we can safely
commit to our forward budgets. In the schools area we have that
£39 million but we have also allocated £40 million to
higher education to deal with the arguments about the right level
of funding of the research assessment exercise outcomes. So that
is £79 million all together.
Mr Crowne: On the criteria for
the £28 million, effectively what that was for was to convert
the 3.2% floor which applied simply to education formula spend
funding—in other words local authority funding—to
a 3.2% floor taking account of the changes in the standards fund
grant as well. So where an authority was on the 3.2% floor and
was adversely affected by the standards fund changes, we compensated
them so that we could say that every authority had a 3.2% floor
when you took into account both the education formula spending
and the grant changes.
Q86 Mr Chaytor: In terms of the rolling
up of the standards fund into the core allocation, when was that
decision taken?
Mr Normington: The decision to
do it was taken after the spending review last year. It was part
of the agreement with the Treasury that we would begin to unwind
the level of central grant funding and we would end some of it
and we would also transfer some of it into local authorities.
So both those things have been happening.
Q87 Mr Chaytor: So there was a six-month
period between the Department deciding to integrate the standards
fund and the announcement of this year's settlements?
Mr Normington: I think yes, but
actually probably that was not announced until—
Q88 Mr Chaytor: The planning time
is what I am trying to get at.
Mr Normington: The planning time
was short.
Q89 Mr Chaytor: But it was, surely,
possible to anticipate that coupled with the redistribution built
into this year's settlement the integration of the standards fund
into the core budget would have caused a lot of turbulence?
Mr Normington: Yes. It goes a
bit like this: there is a lot of money going into the system—was
our first thought. That is still the case. What we did not have
at that point was a conclusion to the debate about how the main
funding settlement was allocated. So we are sort of working through
a list here and saying "There is this change, and there is
this change, and these are demands and then there is the standards
fund." It goes back to the discussion we were having about
our ability to plan sufficiently far ahead for it to be modelled
locally. So even if you take the ending of the standards fund,
we are doing two things this year: we are actually transferring
some of the demands and some of the money to cover those demands.
In other cases we are saying we think the standards fund grant
has run its course and is not needed. So both those things are
happening, which again complicates it. I am sorry it is complicated.
Q90 Mr Chaytor: Just looking forward
to the future, you will appreciate that those of us who believe
in conspiracy theories are deeply suspicious that part of the
furore over this year's allocation to schools is generated
by those schools and authorities who were beneficiaries of the
previous funding system, particularly through the area of cost adjustment,
who are hugely—and their supporters—resistant to the
redistributive effects of this year's settlement. My question
is, how do you anticipate that the solving of the problem in the
future will impact on the Government's capacity to gradually phase
out the floors and ceilings and, thereby, allocate to those authorities
who ought to be benefiting the full fruits of the benefit that
the formula should be giving them?
Mr Normington: I think that what
you say is very interesting. There has not been a debate about
the underlying principle of actually redistributing schools' money
around the country. Of course, that is the underlying issue here.
The big change is about trying to move to a formula which the
Government believes is fairer in distributing money. You will
get winners and losers in that. That is the basic issue. You are
right also in saying that the full effects of that is dampened
by putting in floors and ceilings, and that the louder the noise
the more difficult it is to get to the final point where that
all works through. I am quite sure that assuming we stick to something
like the present system next year there will have to be more floors
and ceilings. I imagine that would have to be part of the arrangement
but if we believe that this funding distribution settlement is
fairer we should get to the final point because if it is fairer
it means there will be a fairer distribution of money round the
country. I believe that case is not understood and not argued
and it should be argued, because after all there were a lot of
people involved in trying to work out a fairer formula to distribute
money round the country. By the way, of course, we believed that
since the amounts of money going into education this year are
so large, 11.2%, you could make those changes and have increases
in every place as well.
Q91 Mr Chaytor: But the losers are
fighting a rearguard action. I am interested in what the Department
is going to do next year in terms of putting money in to supplement
the formula which will have an effect on the process of redistribution.
Mr Normington: I cannot answer
that.
Q92 Mr Chaytor: Will you speed up
or slow down the process?
Mr Normington: I cannot answer
that. I think we have to continue, if we believe in the formula,
but how quickly we go—
Q93 Chairman: Why can you not answer
that? In the sense that local authority education spending plans
have already been set, have they not? They are in the spending
review.
Mr Normington: Yes they are, but
we are taking another look at the position as a result of what
has happened.
Q94 Chairman: But their assessed
method is locked in place, is it not?
Mr Normington: The basic formula
is but there is a question about how much money there is, a question
about how it is distributed and a question of whether we end central
grants—there are all those sorts of issues. There is also
the question of what demands there will be in the system and there
is the question of the floors and the ceilings, which is what
Mr Chaytor is concerned about.
Q95 Chairman: You can do that for
2004-05 now—you can put in floors and ceilings now.
Mr Normington: Not until we have
actually looked at the whole position that I have described.
Q96 Chairman: On the one hand you
are saying "not until", but what we are arguing is because
you have accepted the system and the navigation is set you have
not convinced us that there is any real flexibility. We suspect,
if there is not, you are going to hit the same turbulence next
year.
Mr Normington: I said to you I
did not think we could simply stick with the way that it happened
this year.
Q97 Chairman: We are saying we do
not think you can change it.
Mr Normington: One way we can
change it is by changing the floors and ceilings. Of course, as
I think you were implying earlier, the way we set the floors and
ceilings for education has a significant impact on the rest of
the local authority settlement, and if we get that wrong, as you
were saying earlier, then we are actually saying "You should
spend all the money on education and you have got nothing for
your other services". Those are discussions, of course, that
we need to have, and it will take a long time because we do not
want to get it wrong.
Q98 Mr Chaytor: One last question
on that, perhaps, is that local authorities have been given indicative
allocations for the next three years. Are those going to change
as a result of your attempts to make sure this does not happen
again? Do you stick by the indicative allocations?
Mr Normington: We try to stick
to the indicative allocations, but within the overall allocations
we have to look at the impact on education. I do not want to commit
myself to doing anything, otherwise I will have 150 letters complaining
we are going to change it or I will have 150 letters saying we
are not going to. At this moment we are taking a serious look,
with local government, sitting round the table, at the impact
of this year's settlement and the likely impact of next year,
and there may be some changes.
Q99 Chairman: What are the options
now that you are giving to the Secretary of State for avoiding
turbulence next year?
Mr Normington: At this moment
we are still dealing mainly with the impact of what is happening
this year, but clearly we are looking at things like the floors
and the ceilings that you put in; we are looking at issues about
whether we should end the standards fund grants in the way that
we planned, and if we do whether there should be a transfer of
money again. We are going to press the School Teachers' Review
Body again for a two-year pay settlement and we are hoping to
engage some of the teacher trade unions and associations in that
because we think that will provide stability to budgets. Then
there is the question of whether we use our powers to be a bit
more specific about how local formulae should ensure that the
money gives every school a reasonable settlement per pupil, which
is what the Secretary of State has said he wants to happen. There
are quite a lot of things within the overall system about how
the money is allocated which we are looking at, and none of them
are easy.
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