Select Committee on Work and Pensions Second Report

Annex 2

Summary of Tom Sefton's work


Spending on school and pre-school education increased by 38% in real terms between 1996-7 and 2002-03. This is greater than the rise in overall government spending over the same period.

Spending has increased fastest for the under 5s.

The allocation of resources to local authorities for schools is geared to areas with high deprivation and education authorities are expected to pass at least 85% of that on to schools using a formula agreed by government and with a slight gearing to social needs.

A growing part of the schools budget (around 16%) is set aside for central initiatives - mostly for the Standards Fund but also Education Action Zones, Excellence in Cities programme and these are geared to deprived areas.

Overall spending in the 10% most deprived areas is on average 24% more than spending in ten% least deprived areas - though part of this is a London effect through the Area Cost Adjustment. This estimate (for 2003 -04) takes account of the switch to Formula Spending Shares (FSS).

As a result of being more responsive to social needs and because an increasing share of the budget has been channelled through special initiatives, Education spending has become more skewed towards the poorer areas since 1997/98.

In 2002-3, local authorities on average set their education spending about 10% higher than the government central allocation (known as the Standard Spending Assessment until 2003/4). However "although there is quite a lot of variation between individual authorities, there is a clear tendency for authorities in the more deprived areas to spend less on education relative to their SSA than authorities in less deprived areas." One reason for this may be that poorer areas are more constrained in their budgets. Another reason maybe that local authorities' allocation formula to schools is less geared to deprivation than central government's allocation to local authorities and this may be partly because of lower staying on rates after age 16 by poor children.

Perhaps more importantly, changes to the national funding formulae for education will have had little impact on the amount spent on poor children in the absence of more effective mechanisms at the local level to ensure that additional funding reaches the poorest children within each authority. There is an apparent inconsistency in the current system of funding. Also, local funding formulae for schools generally give less weight to social needs than the national funding formula.

There is very little evidence of what priority schools give to poverty in their allocation of the resources they receive. However evidence from Dr Tess Ridge stated:


Spending is mainly determined by need, which is mainly determined by the demographic composition of the local population.

Between 1996/97 and 2000/01 health spending per capita on pre school children rose by 40% in real terms - well above average, while spending on school age children fell by 8% in real terms (according to the Department of Health's own published estimates).

The NHS priorities tend to be concerned with conditions, such as mental health, heart disease and cancers, that affect older people. But there is also some evidence that children's health has been improving relative to adults.

The funding formula is also related to "additional needs", either an index of deprivation or indicators such as low birth-weight which are related to deprivation. The result of this is that, for example, spending on the 10% most deprived Primary Care Trusts in 2003/4 was 38% higher than the 10% least deprived.

It is probable that health care spending has become more skewed to deprived areas since 1997.

However, higher levels of funding for poorer areas, does not necessarily mean that proportionately more is spent on poor children.

Survey evidence suggest that children from poor households are more likely to report general health problems, and so they may be using fewer health resources in comparison with their needs than children from better-of families.


Spending on social services increased by 27% in real terms between 1996/97 and 2000/01, and spending on children's services increased slightly more than this. This is despite the fact that central government's allocation to local authorities for children's services fell by 3% in real terms during the period.

Spending on children's services is heavily weighted to poor children.

Central government allocation to local authorities is geared to a range of indicators of child poverty, including the prevalence of lone parent families and children on Income Support.

Spending on children's services in the 10% most deprived local authorities is about two and half times the spending in the least deprived local authorities. However, since 1998/99 there appears to have been some narrowing in the differential.

How local authorities decide to allocate expenditure is up to them, and the overall picture is complicated by the Area Cost Adjustment, which benefits London and the South East.

Spending per looked after child gives an indication of local authorities decisions. There is considerable variation, the extent to which seems hard to justify.


Housing subsidies, direct and indirect, were a very targeted form of help to low income families.

Families with children received much more subsidy than other households in 2000/01.

Poor households with children received much higher subsidies.

The value of housing subsidies fell between 1996/97 and 2000/01, although the abolition of MIRAS mainly affected better off households. The poorest households were receiving only marginally less, on average, than at the beginning of this period. The value of subsidies may have fallen further since then as working families with children have been lifted out of entitlement to Housing Benefit by tax credits.


Targetted initiatives have grown since 1997 but make up only about 5% of the total welfare spend on children.

However by definition they are of more importance to poor children (especially pre-school children) because they are means-tested, or targeted to children living in deprived areas.

The problem with these initiatives is that they often involve matched funding from local authorities, which takes away from mainstream services. They also tend to demand partnerships or other collaborative working which is heavy on staff time. In the cross-cutting review of spending on child poverty in Scotland Convention of Scottish Local Authorities (COSLA) were particularly critical of these central initiatives.

273   Ev 235 Back

274   These include:

Early years: Surestart local programme, Neighbourhood Nurseries initiative, NOF's Out of School Programme/ Neighbourhood Childcare Initiative, Early Excellence Centres, Child Trust Fund, Sure Start Maternity Grant.

Education: Excellence in Cities, Behaviour Improvement Project (BIP), Education Action Zones, Pupil Learning Credits, Vulnerable Children's Grant, Educational Maintenance Allowance (EMA)

Health: Welfare Food Scheme, National School Fruit Scheme, Five-a-day local communities initiatives, Teenage Pregnancy Strategy, Brushing for Life.

Other: Children's Fund, Local Network Fund, Parenting Fund, Family Support Grant, Connexions Service, Positive Activities, Youth Inclusion Programme, Warm Front.


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