1.  NEW SCHOOL FUNDING ARRANGEMENTS FROM 2006-07

Question 1—In last year's (and earlier years') Departmental Report, there was a table entitled "Table 12.3 Education Expenditure by Central and Local Government by Sector in Real Terms in England 1999-00 to 2004-05 (£ million)". Without explanation, this table has been dropped from the 2006 Report. It would assist the Committee enormously if the Department could resurrect this table, and run data for the full period from 1997-98 to 2007-08. The transfer of schools' funding from local to central government control means the Department's previously-deployed argument for not including spending plans for future years is no longer valid. This table should be presented (in line with 2005 Table 12.3) as £ million numbers. But we would also like to be provided (as a separate table) with the same information expressed as indexed changes, ie, "1997-98 = 100" for each sub-head.

  Table A below shows Education Expenditure by Central and Local Government by Sector in Real Terms in England in £ millions. Table B shows the same information expressed as indexed changes with 1997-08 =100 for each subhead. The figures are based on historical Local Authority Capital Outturn Returns and Section 52 returns on current expenditure. Figures for 2005-06 are estimated using historical data. Despite the creation of the dedicated schools grant, we do not think it is possible to include figures for future years with any accuracy for two reasons. First, the precise split of school funding between age phases will depend on the application of local authority funding formulae. Second, a significant amount of funding (over £3 billion in 2005-06) has remained with Local Authority FSS to support LA delivered services to schools such as transport. Actual amounts spent in the two years concerned will depend on decisions by individual Authorities.

NOTES

  (1)  Figures within Departmental Expenditure Limits (DEL). Excludes DfES administration costs and expenditure on other areas than education, for instance on children and families and on skills. Figures for 1998-99 onwards are resource-based. Central government figures for 1997-98 are cash-based.

  (2)  Differences between the totals above and the figures for education spending published in Table 8.1 of the Departmental Annual Report are the result of (a) data coverage: the exclusion of AME items in the above table, (b) definitional differences: Departmental administration costs and Ofsted spending on education are both classified as education spending under UN Classification of Functions of Government(COFOG) international definitions—the above table excludes these, (c) reclassifications made since Budget 2006 of Connexions spending to social protection and Adult Education spend to training in line with UN COFOG definitions. The next scheduled HMT National Statistics release in July will update education spending to take account of these reclassifications, (d) further minor data coverage and timing differences.

  (3)  The recurrent local authority figures in this table are drawn from Table 8.3 of the DAR; the footnotes to that table set out the underlying data sources. The dotted lines denote the changes from the Department of Environment, Transport and the Regions education Revenue Outturn return (the "RO1") to Section 52 Outturn Statements in 1999-2000 and arising from the review of the Section 52 categories in 2002-03 following the introduction of Consistent Financial Reporting to schools.

  (4)  All figures have been converted to 2004-05 price levels using the 29 March 2006 Gross Domestic Product (GDP) deflators.

  (5)  Excludes Private Finance Initiative (PFI) credits (£35 million in 1997-98, £130 million in 1998-99, £350 million in each of 1999-2000 and 2000-01, £450 million in 2001-02, £850 million in 2002-03 and 2003-04, £1,050 million in 2004-05 and £1,200 million in 2005-06).

  (6)  Figures from 2003-04 onwards reflect the transfer of responsibility from the Department to LAs of costs relating to teachers' pensions.

  (7)  Under five figures include education expenditure on Sure Start (Sure Start figures exclude current grant).

  (8)  Includes local authority services to schools, expenditure on City Academies, small remodelling programmes and on teacher training.

  (9)  This line now includes FE Student Support (previously a separate line). Includes expenditure on adult and community learning by LAs, and, up to 2000-01, by the Further Education Funding Council (FEFC) and, from 2001-02, the estimated element of funding on education by the Learning and Skills Council excluding school sixth forms. The figures include Education Maintenance Allowances (EMAs) between 1999-2000 and 2002-03 and other support for students in further education and school sixth forms. The figures exclude EMAs from 2003-04 following their reclassification from DEL to AME. Adult and Community Learning has been removed from the FE line.

(10)  The expenditure data in this table and those used in the calculation of funding per student in FE in table 8.7 and HE in table 8.8 are not directly comparable.

(11)  HE Support includes Student Loans RAB charge; Access Funds; Postgraduate Awards; EUI Bursaries; Discretionary Awards; Mandatory and Student Support Awards and all SLC-paid student support grants. Tuition Fee Grants are included in the HE total. From 2004-05 this line also includes HE Grant and Part Time Grant Support Package.

(12)  The Student Loans RAB Charge estimates the future cost to government of subsidising and writing off the student loans issued in that year. From 2005-06 the Student Loans RAB Charge outturn is predicted to fall as a result of the change in the discount rate from 3.5% to 2.2%. It does not represent the amount of cash lent to students, which has risen each year since the introduction of student loans.

(13)  From 1999-2000, a portion of local authority administration and inspection costs is delegated to schools and is included within the school current expenditure lines. These figures in part reflect the transfer of responsibilities for early years inspection from local authorities to Ofsted.

Question 2—In Departmental Report 2006, Annex A provides a table of "Public Spending" showing a transfer of £34 billion from "Local Authority Current" to "Schools, including Sixth Forms"—a move from local to central government. No effort is made to provide a stepped, overlapping, series of numbers that would make it possible to read across the change in control. We therefore ask you to provide a new version of the table with at least one stepped, overlapping, year of data. We note that HM Treasury, can, in Table 1.15 of their publication Public Expenditure Statistical Analyses 2006 (Cm 6811), attribute central and local education expenditure for 2006-07 and 2007-08 on a consistent basis with the figures for earlier years.

  The increase in the schools including sixth forms line between 2005-06 and 2006-07 reflects the transfer of £26.5 billion of money into the Departments DEL originally distributed by the Department of Communities and Local Government (DCLG) to local authorities as part of the local government settlement. This money will be distributed through the Dedicated Schools Grant. The change was made so that funding previously provided to local authorities and intended for schools is now certain to be spent on schools.

  The Local Authority Spending on England lines in Annex A of the Departmental Report reflect what local authorities spend in a given year on education and youth related services rather than the funding they will receive. Spending in a particular year on current and capital projects will depend on both the level of direct grants that local authorities choose to make and the amount of money they choose to allocate education from the local government finance settlement. The latter is a local decision and we have no means of knowing what that decision is until outturn data are collected at the end of the year. Whilst Table 1.15 of the Public Expenditure Statistical Analyses 2006 (Cm 6811) estimates central and local expenditure for 2006-07 and 2007-08 it does not provide any breakdowns for education spending.

Question 3—In Departmental Report 2006, the possibility of comparing real expenditure per student from sector to sector has been made significantly more difficult because of presentational changes and inconsistencies. Table 8.4 (funding per school pupil) covers the period 1999-00 to 2007-08, while Tables 8.7 and 8.8 only run from 2001-02. We would like an explanation of why this has been changed. We would also like all three tables to be re-presented to run from1997-98. Furthermore, Table 8.4 shows a money total for year-on-year change, whereas Tables 8.7 and 8.8 show a real terms index. We would like to see all three tables with a real terms index starting with 1997-98 = 100.

  The three tables requested are attached below. As requested they are all presented over the period 1997-98 to 2007-08 with real time indices.

  As indicated in the Committee's hearing with officials on 14 June, the different presentation of tables was not intended to mislead. The intention was to produce a helpful summary of the Department's work over the last year, with tables and graphs added to illustrate the point over an appropriate length of time. The longer the time series shown will make the tables more complicated and lead to more footnotes being required over time.

NOTES

(1)  Figures are rounded to nearest £10.

(2)  Funding consistent with Education Standard Spending/ Education Formula Spending and Dedicated Schools Grant from 2006-07 plus all schools-related revenue grants in DfES's Departmental Expenditure Limit which are relevant to pupils aged 3-19. Funding excludes Childcare and Sure Start.

(3)  Calculations are based on full-time equivalent pupils aged 3-19 in maintained schools in England taken from the PLASC dataset as at Jan 2006, Form 8B and Early Years census. This includes estimated numbers of 3-year-olds funded through state support in maintained and other educational establishments.

(4)  Includes funding for Academies and Specialist schools but excludes City Technology Colleges.

(5)  Pensions transfers to Education Formula Spending and the Learning and Skills Council have been deducted from 2003-04 onwards, with notional transfers for the final two years.

(6)

The funding series above excludes capital funding and is therefore different from the per pupil funding series announced in the March 2006 Budget. The March 2006 Budget funding series was calculated on a total of revenue and capital funding and using full-time equivalent pupils aged 3-19 from the PLASC dataset only.

(7)  Real terms figures have been calculated using the March 2006 gross domestic product deflators with 04-05 as the base year.

NOTES

  (1)  Full time equivalent (FTE) students funded by the LSC in futher education sector colleges, external institutions, specialist designated institutions, dance and drama institutions or higher education institutions.

  (2)  Rounded to the nearest £10.

  (3)  1997-98 only, includes assumed additional employer contributions.

  (4)  From 1999-2000 onwards, excludes 18,500 FTE Higher National Certificate/Diploma students and associated funding which was transferred to HEFCE.

  (5)  A break in the series shown in 2003-04. This follows a change in the method of measurement, meaning that learners leaving between October and November are now captured by the data source, resulting in a larger estimate of full-time equivalents.

  (6)  The real terms funding index has been based with 2000-01 as 100, and rebased in 2003-04 as 100 due to the break in the series, and has been calculated using March 2006 GDP deflators.

  (7)  Unit funding figures for 2001-02 and 2003-04 are based on the actual expenditure by the LSC and actual full-time equivalent volumes.

  (8)  The provisional unit funding figures in 2004-05 are based on outturn expenditure in 2004-05. This is divided by the estimates of full-time equivalent students for the 2004-05 financial year using actual full-time equivalents in 2003-04 academic year and planned full-time equivalents in the 2004-05 academic year.

  (9)  The planned participation funding figures are consistent with the 2005-06 Grant Letter and Priorities for Success

(10)  From 2001-02 onwards, Total participation funding includes: Teachers' Pension Scheme (TPS), Teacher Pay Initiative (TPI) and some Standards Fund resources, which were consolidated in 2003-04; and UfI/learndirect or Personal Community Development learning/ Adult Community Learning.

NOTES

  (1)  There are two series of unit funding to reflect the changes in HE funding that will occur after 2005-06 when tuition fees for full-time undergraduates will no longer be regulated as now and to demonstrate that, in addition to fee income, DfES grant per student for institutions will be maintained in real terms.

  (2)  All figures are at 2004-05 prices, rounded to the nearest £10, and consistent with the plans set out in the annual grant letter to the Higher Education Funding Council for England (HEFCE).

  (3)  "Total funding" means all DfES revenue grants to support Higher Education in Higher Education Institutions (HEIs), Further Education Colleges (FECs) and The Training and Development Agency for Schools, and public and private contributions towards the cost of regulated tuition fees for full-time undergraduates.

  (4)  The planned student numbers used in the "total funding" series are taken from a snapshot count and cover students of Home and EU domiciles studying at HEIs and FECs in England.

  (5)  The Real-Terms index for this series has been based with 1997-98 set as 100 and using the March 2006 GDP deflators. Real terms indices calculated from unrounded units of funding.

  (6)  "Funding" covers the same grants as "total funding" but excludes income from tuition fees. From 2006-07 institutions will have discretion to set fees ranging from £0 to £3,000 depending on student demand.

  (7)  The planned student numbers used in the "funding" series are taken from a whole-year count which replaces the previous snapshot count method because it is more accurate.

  (8)  Figures are higher than those published in last year's report as they take into account revised planned student numbers as published in the January 2006 grant letter to HEFCE.

  (9)  Real-Terms index has been based with 2005-06 set as 100 and using the March 2006 GDP deflators. Real terms indices calculated from unrounded units of funding.

(10)  In 2005-06 the difference between the two series is due to two factors:

        (a)  excluding tuition fee income which accounts for about £700 (the difference is less than the standard fee as figures are on an FTE basis) and

        (b)  the move to the whole year count method which accounts for the residual.

Question 4—Moreover, changes in the presentation of data occur in Tables 8.7 and 8.8, creating the need for "steps". In each case, the footnotes explaining the table are longer than the table itself. What the Committee needs in each case is a table showing government expenditure (resources deriving from the Consolidated Fund) per student and we ask you provide this. In the text on page 87, it is stated that "publicly planned funding for higher education in 2005-06 was £7.7 billion, an increase of around £500 million above 2004-05 funding levels". Yet Annex A of the same volume (page 100) shows "higher education" "consumption of resources" as £6.9 billion in 2005-06, an increase of £110 million above 2004-05 levels. The casual use of different terms and concepts makes it impossible to follow the Department's use of data, which makes the Committee's job very difficult. Just as an example, we would like a full explanation of how each line of data in Table 8.8 was calculated.

  The table requested for further education will be the same as Table 8.7 in Question 3 because all the resources for further education derive from the Consolidated Fund.

  For higher education the table below shows total government expenditure per student in higher education. This builds on Table 8.8 of the Departmental Report where the unit of funding only incorporates government expenditure on teaching in the numerator.

  In the time period covered by the table, changes were made to the treatment of student loans in resource accounts, and to the balance of support between grants and loans. Thus, from 1998-99, income contingent loans replaced the Mandatory Award Scheme grants and Mortgage Style loans. Although the new loans continued to provide significant cash support to students, only the resource cost of the loans is shown in the table and hence the real terms index falls in 2000-01. Similarly, between 2004-05 and 2005-06, the amount of cash lent to students increased slightly, yet a technical accounting change (reducing the discount rate from 3.5% to 2.2%) reduced the resource cost of the loans to government even though the cash cost increased.

  Of course, the table does not reflect the additional income to institutions from private contributions to tuition fees either since 1998 (the introduction of the fixed rate tuition fee) or from 2006 (the introduction of variable fees).

£ million

	97-98	98-99	99-2000	2000-01	01-02	02-03	03-04	04-05	05-06	06-07	07-08
Government HE Expenditure (£m) (1) —as per DAR table 8.2	5,934	5,956	6,250	5,898	6,049	6,368	6,809	7,191	7,690	8,499	9,060
Number of students (thousands) (2)	989	1,007	1,019	1,064	1,087	1,101	1,115	1,137	1,165
consistent with DAR table 8.8									1,178	1,203	1,223
Real terms expenditure per student	7,050	6,770	6,890	6,140	6,020	6,060	6,240	6,330	6,470
(to nearest £10, 2004-05 prices)									6,390	6,760	6,900
Real terms index (1997-98=100) (3)	100	96	98	87	85	86	89	90	92
Real terms index (2005-06=100) (4)									100	106	108

NOTES

(1)  Government expenditure includes the cost of student loans on a resource basis.

(2)  The first series of student numbers are taken from a snapshot count and cover students of Home and EU domiciles studying at Higher Education institutions and FE colleges in England.

The student numbers used in the second series are taken from a whole-year count which replaces the previous snapshot count method as it is more accurate.

(3)  The Real-terms index for this series has been based with 1997-98 set as 100 and using the March 2006 GDP deflators.

(4)  The Real-terms index for this series has been based with 2005-06 set as 100 and using the March 2006 GDP deflators.

  Concerning the complexity of tables generally, while it may be desirable to show information in a simple table without the need for extensive footnotes it is not always possible to do this. In addition to improvements in the collection of data, there are changes in definitions and Machinery of Government changes which need to be explained. The longer the period covered by the table the greater will be the likely footnotes needed to fully explain what the data represents. If changes are so fundamental the only way to show the data in a fair way may be to produce a "stepped" table.

  The £7.7 billion in the text on page 87 of the Departmental report includes both recurrent and capital funding (see Table 8.2) whereas the £6.9 billion in Annex A (page 100) covers recurrent funding only.

  Concerning Table 8.8, the unit of funding used has been changed in two ways:

—  Firstly, the numerator for the new unit excludes tuition fee income. This is because the income from the fixed tuition fee (eg the £1,175 fee in 2005-06) could be forecast reliably, whereas income from the new, variable tuition fees (ie up to £3,000 in 2006-07) is, by its very nature, uncertain and thus cannot be included in "planned" funding.

—  Secondly, the planned student numbers used as the denominator have been redefined. The old unit uses a snapshot count whereas the new unit uses a whole-year count that is more accurate.

  By presenting both the old and the new units for 2005-06, the table shows that Departmental funding per student for institutions will be maintained in real terms and thus the variable fee income will be genuinely additional.

Question 5—In the Department's Response to the Committee's Second Report of Session 2005-06, it is stated that the Department would "welcome the Committee's views" on the Government's plans for the new schools funding system. Perhaps you could now send the Committee a full set of all papers issued to "national partners" on the proposed new system. Because your reply will be received after the end of the comment period (ie after 31 May), the Committee would welcome a clear written analysis of the views offered by the national partners. In particular, we would like to see a list of all the national partners included in the consultation and also an analysis of which ones actually responded formally to the consultation process. We would also welcome a detailed timetable for the Department's programme of consultation and planning of the schools funding system during the period after 1 June 2006, including a clear indication of when a final scheme will be published.

  As the Permanent Secretary and Director General, Finance explained at the hearing on 14 June the Department apologises for not consulting the Committee appropriately. The Department wrote to local authorities, Schools Forums and a range of organisations on 6 April 2006, setting out how we intend to take forward the review of the school funding arrangements. The letter, organisations consulted and terms of reference were published on the TeacherNet website and are at the end of this note.

  The responses are currently being analysed and it is our intention to publish a summary report on the TeacherNet Website in the summer.

  The timetable for the review has been published on TeacherNet and is:

—  Phase 1—Spring/summer 2006— collection and analysis of evidence about how the new arrangements are working.

—  Phase 2—Autumn 2006— analysis of options in consultation with national education partners.

—  Phase 3—Spring 2007— wide consultation with local authorities, schools and other education partners.

—  Phase 4—Summer/autumn 2007—Ministers take decisions in the light of the consultation, and also the outcome of the Comprehensive Spending Review, and announce allocations for 2008-09, 2009-10 and 2010-11 in late autumn.

Question 6—The lay-out and contents of the Departmental Report 2006 is different from that in 2005. We would like an explanation of what changes have been made and also why the Department believes they were necessary. Were any outside institutions consulted on the changes?

  HM Treasury provide guidance for Departmental Reports in November/December prior to publication in the following April/May. This guidance includes the minimum core contents that should be included in all Departmental Reports. Following publication of the 2005 Departmental Reports, Treasury carried out a review of Departmental Report common core tables. A questionnaire was published on the Treasury public website. Treasury also directly consulted the House of Commons' Scrutiny Unit and through the Scrutiny Unit, Committee Clerks. The Department will be taking forward the majority of the conclusions from the review through to the 2007 Departmental Report and will keep the Committee informed of the changes.

  In addition to minimum core contents as set out in HM Treasury guidance, Departments have flexibility to organise their reports in the way that makes most sense in terms of their objectives, organisation and business processes. This ensures effective reporting and full accountability. Following publication of the Departmental Report each year, DfES carries out an internal evaluation and benchmarks against the Reports of other Departments. This has enabled the Department to build on best practice in performance reporting. The recommendations from a PriceWaterhouseCoopers report Public Sector—Building Public Trust which looked at the Departmental Report 2004, 5 Year Strategy for Children and Learners and the Resource Accounts 2002-03, with the objective of improving openness and transparency in the Department's reporting, also led to changes in the 2005 and 2006 Departmental Reports. The Department also ensures that any comments by the Education and Skills Select Committee on the format and content are taken fully into account. A number of tables/annexes in the DfES Departmental Report have been included as a result of requests by the Committee, most notably Annex K (List of Select Committee Reports).

  As a result of these exercises, changes were made to the 2006 Departmental Report to more accurately reflect the Department's current organisation and objectives, with a particular focus reflecting the connections between objectives, PSA targets and aspects of the Department's work. The Department believes the changes, whilst not fundamental, have improved the clarity of the Departmental Report. They reflect the Department's strong engagement with, and understanding of, its stakeholders. No outside institutions were formally consulted on the changes, beyond the consultation undertaken as part of the HM Treasury review. As in previous years, the Department welcomes feedback from contributors and recipients, including the Education and Skills Committee, in order to continue to make further improvements to the Departmental Report.

  In future we will keep the Committee informed of changes that we are proposing to make to the Departmental Report.

July 2006