Select Committee on Office of the Deputy Prime Minister: Housing, Planning, Local Government and the Regions Minutes of Evidence

Examination of Witnesses (Questions 720-739)


23 JUNE 2004

  Q720 Mr O'Brien: They were not passported. The Audit Commission is just referring to the principle of passporting and they said this created an increase of 12.9% in Band D council tax.

  Mr Miliband: It is certainly not the case that the passporting of the 5% increase in education funding on average above previous levels was the cause of a 12% increase in council tax. The cumulation of decisions about spending on other services and about central grant lead to council tax rises and that is the combination of spending pressures and spending investment which in the end produces a council tax rise.

  Q721 Chris Mole: Is the DfES not effectively telling people in a local area that it has a better understanding of the relative need to spend on schools or personal social services than the local authority?

  Mr Miliband: No. That would only be the case if every local council was spending exactly what we told them to spend on education, but they are not. Wandsworth spends 93% of the EFSS on education and the top spending education authority, which I think is Bristol though I stand to be corrected, spends 110% of EFSS. So there is actually a wide variation in education spending by local government.

  Q722 Chairman: Would you like those variations to increase or decrease?

  Mr Miliband: I would always like authorities to spend more on education. I do not really want to get into a ding-dong with Wandsworth here about their commitment to the schools in the area, tempting though it is, but I certainly applaud those authorities who are seeing education investments as absolutely critical to the future of their areas.

  Q723 Chris Mole: When we had universal capping and passporting there was a general convergence between the spending on education and what is now the SF. Does that not implicitly mean that you are going to limit the scope for local authorities to determine what they could spend on environmental and cultural services which are more discretionary in nature?

  Mr Miliband: Obviously if you spend on one thing you cannot spend on another, subject to the size of the government grant increase and what decisions are made about council tax. The priority that the national government gives to education is symbolised in part in the investment which the national taxpayer makes in education and then it is legitimate on that basis to expect the increase which is being given to local government to be at least matched by the decisions which local government makes. Does that mean that there are implications for other services? Yes.

  Q724 Chris Mole: You were talking about regeneration in inner urban areas. If you want to achieve joined-up local government, then councils have to have some flexibility on their discretionary spend in order to achieve those. Does passporting not make it more difficult to deliver joined-up local government?

  Mr Miliband: First of all, passporting relates to the revenue side of the equation. There is a significant investment on the capital side and that is key when one is thinking about the link with regeneration and educational provision. It is important to say first of all that it is not only on the revenue side that you see those links. Secondly, the fact that we are now moving to more schools having extended services before school and after school was a significant contribution to the sort of area renewal which is important. Yes, it would be absurd to deny that there are choices to be made, but there is a balance to be struck and the national priority which has been given to education in the last seven years has actually been to the benefit of the country.

  Q725 Chairman: Yes, but it has ceased to be local administration, has it not? It is really that government is now saying this has to be spent on education. You are putting in passporting and now you have the minimum funding guarantee. Local authorities are getting less and less discretion, are they not?

  Mr Miliband: As it happens, if you think about the developments in relation to children's trusts, if you think about the role that the LGA is embracing in relation to 14 to 19 provision, where it is setting out its stall very, very clearly in a recent publication to be the advocate of the pupil, wherever they are learning, whether it be at school, college or work. Those are important ways in which local authorities are playing a key role in championing the interests of citizens in their area. Funding is obviously important, but passporting relates to the increase in spending, not the total spend. As a basis for moving forward it is very, very important, because the taxpayer expects to see at least the increase in their taxes which is being levied for education going on education.

  Q726 Chairman: Why then do we need the minimum funding guarantee and passporting?

  Mr Miliband: The minimum funding guarantee has been critical to underpin the longer-term stability which we want to see in the education system. It is clear, despite the detailed work which was done in advance of the 2003-04 settlement, that significant numbers of schools were not fully protected and the minimum funding guarantee is there to provide that degree of protection. At a time when the floor is 4% and the ceiling is seven to seven and a half %, there is significant variation, certainly in a minority of schools which were on the funding guarantee and above that obviously significant discretion is being applied.

  Q727 Christine Russell: Earlier you conceded that there had been errors in calculating the LEAs' costs for the last financial year. Why do you think that happened and how are you going to ensure it does not happen again?

  Mr Miliband: I am not sure that I said there had been errors in calculating the LEA costs.

  Q728 Christine Russell: Just in education services. We had the ping-pong between DfES and local authorities saying there was a difference, did we not, that there was a shortfall in the funding?

  Mr Miliband: I think I am right in saying that there was universal agreement that the increase in funding of about £2.7 billion exceeded the increase in costs by about £250 million. I do not think there is a dispute between central and local government about that. What was the case was that there were significant changes in the cost structure, notably in relation to pensions for example which ate up £500 to £600 million of that increase. I think that the diagnosis of what happened, the narrowness of the gap between costs and investment, is not actually very strongly disputed.

  Q729 Christine Russell: What about teachers' pay? Can you not accept that inflation in providing education services has grown at a faster rate than in the rest of the economy?

  Mr Miliband: It was certainly modelled carefully and now that we have effectively a two and a half year teachers' pay deal from the schoolteachers' review body, that puts us in a much, much stronger position. Most people would say that it was not the headline increase in teachers' pay itself which was the main problem in 2003-04, it was the significant other costs around the system.

  Q730 Christine Russell: Would it not just be better if you set out an annual estimate so everyone could see, parents could understand, exactly how much funding was coming from central government, local authorities and in turn exactly how the local authorities were spending the money on education?

  Mr Miliband: It would be helpful for ministers as well as citizens probably. This is certainly a system with significant complexity in it and that can be frustrating.

  Q731 Christine Russell: It is very confusing for parents to be told that a child in Hertfordshire, for instance, gets X amount of funding per year and a child in Cheshire gets considerably less.

  Mr Miliband: But the reason for that is that local government plays an important role in deciding how much extra money it wants to put into education. As central government, we give the same amount per pupil, for similar pupils in different parts of the country. Whether they live in Hertfordshire or Herefordshire primary pupils get £2,100; if their family is on income support they get an extra £1,300. That is fixed around the country. However, Hertfordshire and Herefordshire make different decisions about how much extra they want to put in. We defend that system because it respects the constitutional role of local government in making a decision about whether it wants to put extra in. That does mean we are trading off that balance of power with local differences.

  Q732 Mr Clelland: But that constitutional role is quite restricted in terms of educational spending, is it not? Certainly in my experience and in the evidence we have had to this Committee, those authorities which do have educational responsibilities put education as their number one priority. I am sure you would agree with that. I cannot think of an education authority which does not say that. So why can they not be trusted just to have the freedom to spend according to what they see as their local priorities?

  Mr Miliband: What I would say is that above that which they are given by central government to meet the increase in the FSS, they are and significant numbers of them do. It is also the case that increasing numbers of local authorities put education first. I think I am right in saying that about 95% of authorities passported the increase without demur in this financial year and that is obviously significant and I hope that reaches 100% in the next financial year.

  Q733 Mr Clelland: Do you think that your department can actually specify the appropriate budgetary requirement for every school in England?

  Mr Miliband: Surprisingly many of the head teacher associations have a touching faith in our ability to model the particular needs of 24,000 schools, indeed the Opposition have sometimes had a touching faith in the ability of central government to have a formula which denotes all the variety of urban and rural, small and large settings. We have not had that sufficient confidence to make that move because we think there are advantages in the current system, which does allow the balance of responsibility, the shared responsibility which we think is important.

  Q734 Mr Brady: Given the process of passporting the whole amount on an annual basis, given the minimum per pupil funding increase, is there not a logic which is driving towards DfES making direct payments? It may not be the whole of the funding which goes to schools. It would still be free for local authorities to pay more if they wished. Is there not a logic in what the government is already doing, which is driving towards direct payment?

  Mr Miliband: The logic of the government's position is to recognise and improve on the shared responsibility which exists and that is the balance we are trying to achieve. We do have responsibility for setting the framework, setting the guarantees for parents and pupils, but we have to do it in partnership with local authorities because there are different situations in different parts of the country and that is reflected in how much they spend and how they spend it.

  Q735 Mr Brady: The percentage of funding going to schools which local authorities must pass on to schools will increase every year if government continues to follow its current policy.

  Mr Miliband: The passporting requirement, as you recognise, is a minority aspect of the system. The shared responsibility I talked about is the right basis on which to think about the future of it. There are some direct payments at the moment to the school standards grant, which goes direct to schools; actually it is paid through local authorities which is interesting, given the way some people talk about logic and simplicity in the system.

  Q736 Chris Mole: Annually schools do a tango around the redundancy processes with teachers. Last month the Prime Minister told the NAHT that after this year's spending review, school budgets will cover three years and be based on the school rather than the financial year. When is this actually going to happen and what benefits do you believe it will bring?

  Mr Miliband: The benefits are huge. When head teachers say it is very difficult for them to plan with confidence on the basis of year on year changes to budgets, they are absolutely right. So the benefits are obvious, the benefits to local government as well as to central government are obvious. We are now working with colleagues in government and around the school system, including local government, to put it into practice and we are determined to do so. The current spending review runs up to 2005-06 and we are working hard on an implementation timetable which meets the need, but is also practical and prudential.

  Q737 Chris Mole: How will you actually switch from a financial to an academic year? This is a very big slice of local government funding which is currently organised April to April.

  Mr Miliband: It is significant. Further education colleges are paid now on an annual basis, although in a different way and they used to be on a different system. We have to make sure it is done in a way which works. The key step forward we now have is the schoolteachers' review body making two-and-a-half, three-year pay settlements for teachers, because without that we are completely lost. We then have to recognise that different schools have different pupil numbers and there are things to work through in that process. I do not see it as impossible.

  Q738 Chris Mole: Do you think that will resolve the redundancy problem?

  Mr Miliband: What you have at the moment is an annual process which anticipates redundancies which in 90% of cases do not actually happen, but they are done as protective notices and that is certainly a process which frightens parents as well as politicians—or excites them sometimes—and that is not very healthy. If we can get over that, it would certainly be good.

  Q739 Mr Sanders: Further education was taken out of the hands of local government in the 1980s. The LSC actually funds sixth forms and that has now effectively been taken out of the control of local authorities. Why do we bother retaining anything within the local authority which is connected with education? Why does central government not take that over completely.

  Mr Miliband: The answer to that is surely the LGA document on 14 to 19, where they show a key role for local government as the guarantor for pupils and that is important as well.

  Chairman: On that note, may I thank you very much for your evidence.

The Committee suspended from 4.30pm to 5.27pm for divisions in the House

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