Memorandum submitted by Tony Travers,
London School of Economics and Political Science
1. AN ANALYSIS
OF EDUCATION
SPENDING TRENDS,
1998-99 TO 2004-05
Education expenditure as a proportion of gross
domestic product (GDP)
1.1 Public expenditure on education in the
United Kingdom was equivalent to 5.6% of GDP in 2004-05, a rise
from 4.6% in 1998-99. Table 1 shows education spending as a proportion
of GDP for each year since 1998-99. Spending has increased as
a share of the economy during a period of economic expansion,
so the resources made available have increased significantly in
real terms. It is worth adding that public expenditure on education
and skills as a proportion of GDP was also well over five per
cent in the early 1990s. There is now evidence that the increase
in public expenditure on education (as a percentage of GDP) is
levelling off. Health expenditure, on the other hand, continues
to rise as a proportion of the economy.
Table 1
PUBLIC EXPENDITURE ON EDUCATION AS A %
OF GDP, 1998-99 TO 2004-05—UNITED KINGDOM
|
| 1998-99 |
1999-2000 | 2000-01
| 2001-02 | 2002-03
| 2003-04 | 2004-05
|
|
| Education as % of GDP | 4.6
| 4.6 | 4.8
| 5.1 | 5.2
| 5.5 | 5.6
|
| Health as % of GDP | 5.4
| 5.4 | 5.6
| 6.0 | 6.3
| 6.7 | 7.0
|
|
(Source: Public Expenditure Statistical Analyses
2005, Cm 6521, London: TSO Table 3.4).
EDUCATION EXPENDITURE,
BY SUB-SECTOR,
IN REAL
TERMS
1.2 Table 1 showed overall UK public education expenditure
as a proportion of GDP. Another way of analysing spending is to
compare changes adjusted to take account of inflation (ie in real
terms). Table 2 shows real terms spending on each phase of education
in each year since 1998-99.
Table 2
EDUCATION EXPENDITURE, BY SUB-SECTOR, 1998-99 TO 2004-05—ENGLAND
|
| £ million, in real terms
|
| 1998-99
| 1999-2000 | 2000-01
| 2001-02 | 2002-03
| 2003-04 | 2004-06
| Change 1998-99 to 2004-05
|
|
| Schools current—total | 21,545
| 23,073 | 25,120
| 27,501 | 28,362
| 31,171 | 32,510
| +50.0% |
| of which: | |
| | | |
| | |
| Under fives | 2,067
| 2,296 | 2,573
| 3,095 | 3,141
| 3,549 | 3,859
| +86.7% |
| Primary | 7,679
| 7,963 | 8,651
| 9,327 | 9,714
| 10,282 | 10,737
| +39.8% |
| Secondary | 9,692
| 10,114 | 10,883
| 11,942 | 12,409
| 13,651 | 14,199
| +46.5% |
| Other | 2,120
| 2,700 | 3,013
| 3,137 | 3,105
| 3,689 | 3,716
| +75.3% |
| Schools capital (total) | 1,358
| 1,468 | 1,793
| 2,041 | 2,217
| 2,534 | 2,957
| +117.7% |
Further education & adult | 3,804
| 3,841 | 4,121
| 5,031 | 5,297
| 5,904 | 5,933
| +56.0% |
| Higher education | 5,160
| 5,477 | 5,091
| 5,335 | 5,480
| 5,728 | 6,097
| +18.2% |
| Student support | 1,578
| 1,383 | 1,419
| 1,211 | 1,219
| 1,210 | 1,236
| -21.7% |
| Admin & inspection | 1,565
| 1,037 | 1,097
| 1,241 | 1,496
| 1,564 | 1,653
| +5.6% |
| Total | 35,010
| 36,279 | 38,640
| 42,358 | 44,077
| 48,112 | 50,386
| +43.9% |
|
(Source: Departmental Report 2004 and Departmental
Report 2005 Department for Education and Skills, Cm
6202 and Cm 6522, London:TSO, Table 2.3 (1998-99) and Table 12.3
(all other years)).
1.3 Spending on each phase of education (apart from student
support) has increased in real terms in the years since 1998-99.
The final column of the table shows overall spending changes over
the full period. Overall, schools' current spending increased
by 50%, compared with 56% in further education and only 18% in
higher education.
1.4 Table 3 summarises spending per pupil/student data for
the schools, FE and HE sectors in each year since 1998-99. Spending
per pupil/student has increased fastest in schools, followed by
further education. By contrast, real terms higher education spending
per student has remained little changed, suggesting a continuing
major relative shift of public resources away from universities
towards other phases of education. Other university resources,
of course, may have increased.
Table 3
REAL TERMS FUNDING PER STUDENT/PUPIL, 1998-99 to 2003-04
(1998-99 = 100)
|
| 1998-99 |
1999-2000 | 2000-01
| 2001-02 | 2002-03
| 2003-04 | 2004-05 plans
| 2005-06 plans |
|
| Schools | 96
| 100 | 107
| 111 | 115
| 119 | 124
| 130 |
| FE | 93 |
100 | 104
| 112 | 113
| 120 | 122
| 127 |
| HE | 101 |
100 | 100
| 100 | 101
| 104 | 105
| 105 |
|
(Source: Departmental Report 2005, Department for
Education and Skills, Cm 6522, London:TSO, Tables 12.5 (derived
from figures given), 12.6 and 12.7. Figures for 1998-99 derived
from Departmental Report 2004, Tables 2.5, 2.6 and 2.7).
2. THE DFES
AND THE
SCHOOLS' SPENDING
ISSUE: NEW
PROPOSALS
2.1 In its report on last year's DfES expenditure plan, the
previous Committee examined the schools funding problems that
had arisen during the spring of 2003 and which had led to moves
towards a "minimum funding guarantee" for schools. This
guarantee meant that schools generally received about 4% extra
per pupil in 2004-05, with a similar arrangement for 2005-06.
For those with rising pupil numbers, the figure per pupil will
be rather less than the headline one, while for schools with falling
rolls, the amount per pupil will be greater than the headline
figure. The smallest schools simply receive a fixed minimum percentage
year-on-year cash uplift.
2.2 The impact of the funding guarantee has been to move towards
a national funding arrangement, if not to a full DfES takeover
of schools' resource allocations. The Government has announced
that, from 2006-07, each authority's expenditure on schools will
be set by the Department and fully funded from central grant.
This so-called "Dedicated Schools Grant" (DSG) will
then become the basis for local authorities to use their local
funding formulae to allocate the overall total to individual schools.
In 2006-07, the DSG will be determined for each authority as an
uplift of 5% in 2005-06 spending by schools within the authority,
though taking account of changing pupil numbers. A small margin
of resources that the Government will not have allocated in this
way—roughly 1% of the total—will then potentially
be available for distribution to authorities, partly on the basis
of changes in the Formula Spending Share. It is not entirely clear
how this further distribution will be achieved.
2.3 Thus, the determination of the money each school receives
will be based first on the Government's determination of the DSG
for an authority and, second, on the local "fair funding"
formula.
2.4 Once this allocation process has been completed, it will
be necessary (presumably the local authority will be required
to do this) to ensure that every school has received at least
the year-on-year addition in resources implied by the "minimum
funding guarantee". If any institution has fallen below this
minimum, it will be given the guaranteed figure.
2.5 There may be an incentive for authorities to attempt to
use their local distribution formula in such a way as to maximise
school resources for their area. If the authority's formula-driven
distribution is relatively uneven from year to year (for example,
if the formula has been altered to achieve greater fairness),
it is more likely the minimum funding guarantee will come into
effect. Remember, the Government will grant-fund all of the resources
given to schools.
2.6 The 2006-07 arrangements will be re-used in broadly the
same way in 2007-08. From 2008-09, the DfES intends to introduce
three-year schools funding arrangements, though this would require
(amongst other things) three-year settlements for teachers' pay.
Details of how three-year settlements would work are still be
determined.
2.7 It looks likely that the overall impact of the new schools'
funding arrangements will be rather more conservative than the
one previously operated through local Government. Because the
Government wants to bring funding certainty to schools, there
has been—and will continue to be—a tendency for most
schools to have relatively flat-rate spending increases from year
to year. Pupil numbers will be the key determinant of change.
Thus, as the number of pupils rises faster in some areas than
others, money will gradually move around the country.
3. GERSHON
The Gershon Review was initiated by the Chancellor to achieve
radical improvements in efficiency within Whitehall and the public
services. The efficiencies started at the beginning of 2005-06
and run for three years. The DfES's target savings and progress
so far are outlined in the Department's memorandum to the Committee.
Schools, as the largest part of the DfES budget, are expected
to make the largest contribution to Gershon-inspired efficiencies.
At present, it appears that the Department is seeking to achieve
the improved use of resources within schools, though individual
institutions are not being expected to respond directly to Gershon.
The most important issue for schools, colleges and universities
is the way in which efficiencies liberate resources that can then
be used for productive purposes. The DfES cannot yet point to
such a redeployment of money, though this is surely a subject
the Committee will wish to keep under review.
Education will need to use its resources even more carefully in
future years. The 2004 Spending Review included the following
plans for education and health for 2004-05 to 2007-08:
Table 4
EDUCATION AND HEALTH EXPENDITURE PLANS, 2004-05 TO
2007-08 (UK)
|
| 2004-05
| 2005-06 | 2006-07
| 2007-08 |
|
| Education | 5.4
| 5.5 | 5.5
| 5.6 |
| Health | 6.9
| 7.1 | 7.5
| 7.8 |
|
(Source 2004 Spending Review, Cm 6237, London: HM
Treasury, Tables 7.2 and 8.2).
These figures, though from different sources (both within Government)
from those in Table 1, broadly continue the time-series included
in the earlier table. It is clear that education expenditure will,
over the next three years, enjoy a broadly flat share of GDP,
while health will continue to grow. As a result of the slower
growth in education spending, pressures for efficiency will intensify.
October 2005
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