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David Taylor: I come hot foot from a meeting of the curriculum committee of Ashby school—formerly Ashby grammar school—of which I was chair of governors until May 1997. Our GCSE results have improved in the most remarkable fashion because the percentage of children getting five or more GCSEs has improved from the middle 40s to the middle 60s, with the proportion now heading for 70 per cent. and beyond. That has been achieved without lavish funding. The school has received some extra funding because it has specialist school status, but nevertheless its funding is the same as that available to all upper schools in Leicestershire.

Derek Twigg: Funding is obviously important, but good school leadership and head teachers, good management in schools, great classroom teaching and community and parental involvement in schools can make all the difference.

Some 45.8 per cent. of Leicestershire pupils achieved 5 A* to C grade GCSEs in 1998, compared with a national average of 46.3 per cent. However, the proportion increased to 54.7 per cent. in 2004, compared with a national average of 53.7 per cent. The hon. Member for Blaby made a point about pupils from Leicestershire choosing Leicestershire schools. People are deciding that schools in Leicestershire are of a good quality, and I put on record my praise for the work going on in those schools.

The key issue behind the debate is obviously funding in Leicestershire. It is worth reflecting on the funding increases that Leicestershire has received since the Government came to power. Between 1997–98 and 2004–05, we estimate that Leicestershire's funding per pupil has increased in real terms from £2,670 to £3,380, which is an increase of £710 per pupil. Capital investment has also greatly increased. In 1997–98, capital funding in Leicestershire was only £4.3 million, but in 2004–05, its allocation was £33.8 million. The authority's allocation so far for 2005–06 is £22.8 million, which represents a massive improvement.

I want to consider the national picture before considering specific issues relating to Leicestershire's funding. The education formula spending share is set to
 
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rise nationally to £31.6 billion by 2007–08. That will represent an increase of £5.2 billion from the £26.4 billion figure for 2004–05, which is a 3.5 per cent. increase in real terms.

The settlement for 2005–06 will promote continued stability and certainty for school funding. In brief, in 2005–06, all secondary and special schools will receive an increase in their delegated budgets of at least 4 per cent. per pupil where pupil numbers stay the same. The guarantee for primary and nursery schools is higher at 5 per cent. per pupil, which is because we recognise that those schools need extra support to implement the final phase of the work force reform from September 2005.

We have also ensured that every local education authority has the resources, headroom and flexibility to deliver the guarantee and provide support to help schools facing additional pressures. Next year, all LEAs will receive an increase in their schools formula spending share of at least 5.5 per cent. per pupil. Leicestershire's increase is higher, at 6.3 per cent. per pupil, and above the average increase of 5 per cent. per pupil received by Leicestershire in 2004–05. In 2005–06, standards fund support, the school standards grant and Learning and Skills Council funding for sixth forms will increase by 4 per cent.

David Taylor: Will the Minister respond directly to a point made by my hon. Friend the Member for Loughborough and me? If we are to reduce overheads and bureaucracy, it would be helpful if more of the funding for which bids must be made were incorporated into mainstream formula grants. The standards fund would be a classic example of that.

Derek Twigg: I shall refer to that a little later. The proposed three-year funding settlement for schools is currently out to consultation until May, so I am sure that Leicestershire, and perhaps my hon. Friends, will want to make representations about any specific points.

Although Leicestershire has, like other authorities, benefited from the significant increases in funding that the Government have committed to education, I know that Leicestershire Members have tabled parliamentary questions and secured Adjournment debates on the per pupil funding received by the authority. I shall explain why Leicestershire's funding per pupil is lower than that of other authorities.

The Government aim to give all pupils an equal opportunity in life. Pupils from more deprived backgrounds have additional learning needs and thus need extra help to get that equal opportunity. That explains why the funding formula takes account of the deprivation in each authority and gives additional funding accordingly. Schools that serve deprived communities face significant challenges in handling and educating pupils, so they need additional support. As has been said, Leicestershire is less deprived than many other authorities. Its proportion of pupils from families receiving income support, which is the most heavily weighted deprivation factor, is well below average. In 2005–06, just over 8.8 per cent. of families in Leicestershire received income support, well below the national average for English authorities of 19.4 per cent. of families. Leicestershire is also below the average in terms of the number of families receiving working
 
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families tax credit: the LEA national average is 19.1 per cent. of families, whereas in Leicestershire the figure is 17.3 per cent. Leicestershire also has significantly fewer primary pupils with English as a second language.

Mr. Reed: Although I recognise that, does my hon. Friend understand how those figures relate to the arguments advanced about little pockets of deprivation? The changes made, especially to the sums available for ethnic minorities, have specifically hit places such as Loughborough, where there is a relatively large ethnic minority population with English as a second language. Will he look again at the impact of the change from section 11 to the new formula, which has made an enormous difference? We are experiencing cuts of up to 40 per cent. in funding for schools, particularly those in the town centre. Will he meet me to discuss that specific issue?

Derek Twigg: I shall be happy to meet my hon. Friend, but I repeat that the new funding formula and the three-year deal for schools are out for consultation until May. I am sure that my hon. Friends, schools and councils will make representations in that respect.

David Taylor: Does my hon. Friend agree that it would be logical and consistent if the money distributed to Leicestershire in recognition of the pockets of deprivation in the county, such as the ones in Loughborough and Coalville, were earmarked for and passported to the schools for which it is intended? Should not the LEA be doing something to ensure that its internal distribution formula reflects that?

Derek Twigg: As my hon. Friend knows, we have been strict about passporting the full amount of money. "A New Relationship with Schools" and the three-year funding proposal are part of that policy. The LEA is responsible for ensuring that funding gets through to schools.

Only 2 per cent. of Leicestershire's pupils are from ethnic minority backgrounds, compared with the English national average of 8.7 per cent. The funding formula gives additional resources to sparsely populated areas such as Leicestershire to help to pay transport costs and the higher costs of maintaining a large number of small schools. Sparse authorities face higher costs to deliver the same service, and the formula provides additional resources to high-cost areas to reflect the higher costs of recruiting and retaining staff. In 2005–06, for the first time, Leicestershire received extra funding for the area cost adjustment to reflect those costs, although not as much as areas in and around London, as has been mentioned. It is for the LEA through its local funding formula to ensure that additional funding for additional needs reaches those schools that need it.

Our "Five Year Strategy for Children and Learners", which was published last July, is highly relevant to the debate. It set out the funding changes that we propose to introduce from April 2006. The strategy sets out a promise of greater freedom and independence for schools to run their own affairs, with clear and simple lines of accountability, the security of three-year budgets and greater discretion in how schools spend their standards-related grants. The strategy proposed a
 
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package of changes that formed "A New Relationship with Schools", which was designed to provide streamlined and proportionate systems of funding and accountability to allow schools to focus on raising standards and improving outcomes for every pupil.

Since the strategy was published, the Department has worked closely with our national partners through the school funding implementation group to draw up detailed proposals. We are now consulting for 12 weeks, until the middle of May, on those detailed school funding proposals. We propose a dedicated schools grant and three-year budgets for schools aligned to the school year, which will give schools continued stability and predictability and the opportunity to engage in more effective long-term planning, so that they can concentrate on the key role of school improvements, teaching and learning. We also propose to streamline the Department's current standards-related grants to schools through the introduction of a new single standards grant. Local authorities will retain their key role in the local distribution of resources to schools, but, crucially, our proposals will enable authorities to concentrate on their strategic and quality assurance roles in education. Local authorities can add to the dedicated schools grant from their own resources if they wish, but they will not be required to do so.

Hon. Members asked why we do not propose to review the distribution formula as part of those changes. The three-year budget for schools, the new dedicated schools grant and the single standards grant constitute significant changes in themselves, and undertaking a major review of the distribution formula at the same time would be too much change at once. Moreover, the current formula is still relatively new, having been introduced in 2003–04, and no substantial evidence has been brought to our attention to suggest that a major review is appropriate. The consultation document, however, proposes minor technical changes to the distribution of the new dedicated schools grant to reflect the fact that more up-to-date data measuring deprivation and sparsity are available than was the case for the distribution of the schools formula spending shares.

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