Select Committee on Education and Skills Minutes of Evidence


Replies to questions sent by the Committee to the Department for Education and Skills

1.  NEW SCHOOL FUNDING ARRANGEMENTS FROM 2006-07

Question 1.1  The consultation documents issued by the DfES indicate a new funding arrangement in which the Department and Schools Forums will have an enhanced role with regard to schools' funding. The local authority role will be reduced and made subject to significantly greater oversight and control by the other two players. Is this a correct reading of the consultation papers?

  At present the majority of funding for schools is provided through the Local Government Finance System: each local authority sets a Schools Budget, which is funded through a mixture of Revenue Support Grant, Business Rates and Council Tax. The local authority decides, in consultation with its Schools Forum, how its Schools Budget is to be divided between the budget for central spending on school provision and individual school budgets; and how individual school budgets should be calculated.

  Under the new arrangements, local authorities will receive funding for their schools through the Dedicated Schools Grant, allocations of which will be determined by the Department. While the Dedicated Schools Grant will have to be spent on schools, local authorities will be free to add to it from their own locally raised resources, should they choose to do so. In addition, local authorities will have the scope, with the agreement of their Schools' Forums, to combine elements of their school budgets, financed through the Dedicated Schools Grant, with other budgets, to continue to support multi agency arrangements in support of the Children's agenda as set out in "Every Child Matters".

  The Department will therefore be largely responsible for setting the level of spending on schools in each local authority area from 2006-07 onwards. However, under the existing policy of passporting, almost all authorities passed on the increases in school funding that were set by the Department each year: so the introduction of the Dedicated Schools Grant marks only a marginal increase in the control exercised by the Department. Nonetheless, what the creation of the Dedicated Schools Grant does achieve is a welcome clarification of the role of central government and local authorities in setting the overall level of schools' funding for each authority.

  Local authorities will continue to be responsible for allocating funding between their schools, consulting their Schools Forums, as they do now. The new arrangements will see a number of decisions that are currently taken by the Secretary of State left to local discretion: the mechanisms for local decision making are discussed in the answer to question 1.3, and will only involve the Secretary of State in future where it is not possible to reach local agreement. In the future, therefore, we expect there to be less central decision making over the detailed operation of local formulae than there is now.

Question 1.2  What aspects of the existing Formula Spending Share method are thought to be least robust, given the Department's acceptance that it will need to consider a possible reform of the existing allocation system?

  The consultation document on the modified method of allocating the new Dedicated Schools Grant, published on 5 August 2005, recognises that the current level of spend on schools in each authority is not purely determined by the Schools Formula Spending Share. In the current system, authorities choose the level of resources to spend on schools and thus both historical and more recent decisions are factors in determining the level of spend in any authority. The proposed modified method of distribution recognises that current spend does not fully reflect any formula, and it is important to allocate future increases in a way that reflects pressures and the Government's commitment to ensuring year on year increases in funding per pupil for all authorities. We think that aspects of the current formula are robust, but we recognise that the current position does not match any formula. We will be consulting with our partners during 2006-07 and 2007-08 on what implications this has for funding in the longer term.

Question 1.3  What formal status will Schools Forums be given within the new arrangements for determining school funding and will they receive any funding to support their work? Will Schools Forums be able to over-ride or veto the decisions of a local authority about any aspect of school funding? Or will the local authority make all final decisions?

  Schools Forums will be given new powers under the new arrangements to approve certain proposals put forward by their local authority. Specifically, their new powers will be:

    (a)  to agree minor changes to the operation of the minimum funding guarantee, where the outcome would otherwise be anomalous, and where not more than 20% of the authority's schools are affected;

    (b)  to agree to the level of school specific contingency at the beginning of each year;

    (c)  to agree arrangements for combining elements of the centrally retained Schools Budget with elements of other local authority and other agencies' budgets to create a combined children's services budget in circumstances where there is a clear benefit for schools and pupils in doing so; and

    (d)  in exceptional circumstances only:

(i)  to agree an increase in the amount of expenditure a local authority can retain from its Schools Budget above that allowed for in the regulations;

(ii)  to agree an increase in centrally retained expenditure within the Schools Budget once a multi-year funding period has begun; and

(iii)  to agree changes to an authority's funding formula once it has been announced prior to the start of a multi-year funding period.

  These powers relate to areas where we are providing some flexibility for authorities to move away from the requirements of the school funding regulations in order to take account of specific local circumstances: in the past it has only been possible to exercise such flexibilities with the approval of the Secretary of State. The Government believes it is right that it should be possible to agree to the exercise of these flexibilities locally if a consensus can be reached. Where that is not the case, the authority will retain the right to apply to the Secretary of State for a decision: Schools Forums will not have the right to over-ride or veto local authority decisions.

  Funding for Schools Forums is a legitimate charge against a local authority's Schools Budget. The Department is currently working on good practice guidance on Schools Forums which will encourage authorities to provide an appropriate budget for their Forums. If the provision of additional funding for the Schools Forum would cause the authority to breach its central expenditure limit, it will be possible for the Forum to agree to a higher limit, as set out above.

Question 1.4  Is it correct to see the funding arrangements for 2006-07 and 2007-08 as, in effect, using the previous year's schools spending total (ie spending in 2005-06 and 2006-07) within each authority as the starting-point for the next year's schools funding allocation?

  This is correct with respect to 2006-07: the base will be the 2005-06 spending total. However, funding for 2007-08 will use the 2006-07 Dedicated Schools Grant as the starting point. If authorities decide to put in additional funds in 2006-07 from their own resources, that will not affect the 2007-08 allocation.

Question 1.5  Will the review of Dedicated Schools Grant, to report by summer 2007, be undertaken wholly within central government, or will it be an independent review?

  The review will be managed and mainly carried out by the Department, but we will work closely with external partners throughout, and they will be welcome to submit papers on issues of concern to them. There will therefore be scope for independent views to be considered during the review. The review will consider what lessons can be learnt from the first two years of the operation of the Dedicated Schools Grant, and will also work up proposals for the long term, for a robust distribution system that is appropriate for a grant which determines the funding level of schools to a much greater extent than the current system of Schools Formula Spending Shares.

2.  GERSHON

Question 2.1  What is the total of Gershon-related efficiency savings that the full DfES expenditure programme is expected to achieve during 2005-06 and subsequent years? How much of this overall total is attributable to (a) the DfES's own expenditure, (b) to its sponsored bodies, (c) to local government, (d) to schools and (e) to other institutions?

  Along with other Government Departments, DfES was set a target to make efficiency gains totalling 2.5% of its baseline in 2005-06, 5% in 2006-07 and 7.5% in 2007-08. Our baseline for this was the 2003-04 expenditure figure of £58 billion, so our target for 2007-08 annual savings is £4.3 billion.

  Our target savings are:

    for 2005-06—£1.4 billion

    for 2006-07—£2.9 billion

    for 2007-08—£4.3 billion

  In order to meet the target the Department sought to identify savings in its own administrative costs and those of its NDPBs that can be reallocated to front line services, and to identify efficiency gains in the use of wider funding in the system as a whole.

  We expect over a third of our total gains to be realised through improvements in productive time at the front line, and roughly a further third to be achieved through more efficient procurement practices. As the bulk of Departmental expenditure takes place in the schools sector, the majority, some two-thirds, of our efficiency gains are expected to come from within that sector.

  It should be emphasised that our efficiencies are, in the main, efficiency gains (that involve enabling organisations at the front line to use their resources more efficiently) rather than cash savings (although there are some of those also). Many are productive time gains where, for example, teachers will be relieved of administrative duties and thus gain time to concentrate on teaching. Our efficiency gains will have the effect of making the increased resources the Government is committed to putting into front-line delivery go further.

  The gains will be made in all the areas described in the question, including local authorities, (covering children's services and school administration), and other institutions, such as universities.

Question 2.2  What proportion of the Gershon efficiencies have already been achieved and how does the department monitor savings?

  The Efficiency Programme runs from April 2005 though to March 2008 and is therefore in its early stages. We have done a great deal to ensure we are in the best possible position to realise our efficiency target over the next three years, but the programme is at too early a stage to quantify savings in 2005-06 and beyond.

  We have established a Centre for Procurement Performance to promote better procurement across the education, skills, children and families system.

  The New Relationship with Schools (NRWS) removes planning, reporting and monitoring requirements imposed by existing DfES programmes. There are fewer policy initiatives with funding attached, and therefore fewer planning operations to run and less detailed monitoring to be conducted.

  We have made great strides engaging schools to deliver workforce reform where progress on implementation of the third and final phase of the National Agreement on workforce reform is very positive. At the start of the new school term virtually all schools reported that they had completed this final phase or had a plan to do so.

  In keeping with our efforts to free-up the frontline from unnecessary bureaucracy, we have largely used existing data sources to provide information to inform progress towards targets. Most gains will be reported on an annual basis and the data will be collected centrally.

  Delivery of all our gains will be achieved through some 10 different policy programmes across the Department. Each has measurement processes in place and reports progress to an Efficiency Board that in turn reports to the main DfES Board. The Minister responsible for efficiency receives regular monthly reports. The Department's Efficiency Technical Note, available on the Department's website at http://www.dfes.gov.uk/publications/otherdocs.shtml describes how each of the 40 stands are being measured.

Question 2.3  What new expenditure has been possible as a result of the Gershon savings? Please give examples of what has been purchased or achieved.

  The great majority of the Department's expenditure is already devolved to the frontline. Schools and other institutions are in the best position to make decisions on how to spend their money in the best way possible to improve the attainment and life chances of pupils and other learners. Therefore, most of our efficiencies are being realised by front line institutions themselves; and the effect of our efficiency initiatives is to enable those organisations to make the most of the resources they have.

3.  SPENDING REVIEW 2007

Question 3.1  Because of the Chancellor's decision to hold the next Spending Review in 2007 (rather than 2006, as previously expected) are there any implications for the education programme of having to use the spending figures published for third year of the 2004 Review?

  As set out in the Chief Secretary to the Treasury's written statement to Parliament on 19 July 2005, the Government will report on the next three-year Spending Review covering 2008-09, 2009-10 and 2010-11 in 2007 and will hold Departmental allocations to the agreed figure already announced for 2007-08.

  In practice, this situation is not particularly different from the situation in previous spending reviews. The spending figures for the third year of the 2002 Review (2005-06) did not change as part of 2004 Spending Review and we would not have expected radical adjustments to spending figures for 2007-08 as part of a 2006 Spending Review. It is open to Ministers to adjust spending plans within those budgets to respond to new or emerging priorities.


Question 3.2  What are the percentage spending increases now expected for the DfES programme for 2006-07 and 2007-08 and how do these figures compare with the equivalent run of percentage increases in each year since 1997-98?

  The table below shows total DfES programme expenditure between 1997-08 and 2007-08 and expenditure on education and children's services delivered through the Office of the Deputy Prime Minister (ODPM):

SPENDING ON EDUCATION, TRAINING AND CHILDREN'S SERVICES BETWEEN 1997-98 AND 2007-08 (£ MILLIONS) 1, 2


<lh1>
1997-98
1998-944
1999-2000
2000-01
2001-02
2002-03

<lh0>
Departmental Expenditure3
12,644
12,536
13,695
16,336
18,934
23,208
Local Education Formula Spending (via ODPM) Education
18,367
19,384
20,414
21,479
22,513
22,502
Children's Social Services
1,755
1,829
1,900
1,988
1,833
1,910
Total expenditure
32,766
33,749
36,009
36,813
43,280
47,620
Year-on-Year change
NA
984
2,260
3,804
3,467
4,340
% Change
NA
3
7
11
9
10




2003-04
2004-05
(Estimated)
2005-06
(Planned)
2006-07
(Planned)
2007-08
(Planned)

Departmental Expenditure3
26,068
27,739
30,688
32,944
35,230
Local Education Formula Spending (via ODPM) Education
25,018
26,341
27,888
29,788
31,588
Children's Social Services
3,038
3,737
4,015
4,315
4,515
Total expenditure
54,124
57,817
62,591
67,047
71,333
Year-on-Year change
6,505
3,693
4,774
4,456
4,286
% Change
14
7
8
7
6


1.  Figures exclude central administrative expenditure.
2.  Source: Departmental Expenditure Reports.
3.  Sum shown are the Total Managed Expenditure.
4.  £528 million moved from DfES to the Office of the Deputy Prime Minister for Nursery Vouchers.

  In 2005-06 £62,591 million will be spent on education, training and children's services including £31,903 million delivered direct to Local Authorities by ODPM. This represents an increase of £29,826 million or an annual average increase of 8% since 1997. Total expenditure will increase on average by 7% per annum between 2005-06 and 2007-08.

4.  PRIVATE INVOLVEMENT IN PUBLIC PROVISION

Question 4.1  The DfES, in common with the rest of government, has increasingly used private contractors to deliver aspects of public service provision. In education, this has meant initiatives such as PFI schools, contracted out learning accounts, privately-financed student residences, co-ordinated purchasing schemes and Academy Schools. How would the Department now describe the Government's approach to the use of the private sector within education?

  The Department considers the range of delivery options for each of our policies. As part of our options appraisal we seek best value for money, informed by what will secure successful delivery both at the present and over time. This may involve public sector delivery, Voluntary and Community Sector (VCS) delivery or private sector delivery as appropriate to the circumstances.

  Involvement of partners from a range of sectors increases contestability, allows for the introduction of specialist skills and knowledge, and allows the Department to share risk. And an additional gain flows from the transfer of skills and experience back to the Department.

Question 4.2   What assessment has the Department made of the effectiveness of private sector involvement in education? In particular, has there been any assessment of whether, and if so how, private contractors or investment have increased capacity or improved provision more effectively than would have been the case if the Department had used public provision alone?

  Most of the Department's programmes are delivered in partnership with others from the public, private or voluntary and community sectors, and our major programmes and contracts are subject to performance review and evaluation. Given the wide range of forms of involvement, it would be difficult to make an informed assessment of the general impact of the private sector on the basis suggested.

  However, the Private Finance Initiative (PFI) provides one important example of the contribution the private sector can make. Many local authorities have partnering arrangements with the private sector to invest in school building projects. There are now 63 PFI contracts in operation covering 435 schools; 29 signed contracts covering 292 schools where building works are in progress; and 16 more projects in development, covering 135 schools. Much of this work would not have been possible without private sector involvement through PFI. HM Treasury's 2003 report, "PFI: Meeting the investment challenge" found that about 85% of the school PFI projects it examined had been delivered on time or early, compared with an average of only 30% of previous non-PFI projects.

Question 4.3  What lessons have been learned by the Department about the use of the private sector within education during recent years?

  There is good and bad practice in working with partners in all sectors. Whether delivery is through the public sector, VCS or private sector, good practice from the Department's experiences and others, including the Office of Government Commerce, suggests a good understanding of what we want, realistic timescales, effective risk management, clear agreements and effective and appropriate delivery monitoring and performance management are important.

Question 4.4  Are there any aspects or parts of education that could never, in any circumstances, be privately provided in this country (even if still free at the point of delivery)?

  The Government is committed to a high quality and responsive state education system which is publicly funded and free at the point of delivery. The Secretary of State has made it clear that she is looking to widen the range of providers in the school system in order to turn round schools that have failed, push those that have been coasting and extend parental choice. She is interested in seeing how the Department can work with a variety of potential not-for-profit organisations to drive the next phase of reform and root it firmly in civil society. More broadly, the Government sees benefits in working with private sector bodies of all kinds—as well as with the voluntary sector—in specific cases where they can help to provide high quality goods and services, bring fresh ideas and expertise into the system or support the efforts of those who work in the public sector to raise standards and secure value for money. This has included for instance use in LEA interventions. It will continue to consider such opportunities on their merits.

  More broadly, the Government welcomes opportunities for partnership with private sector bodies, whether not-for-profit or commercial, as well as with the voluntary sector and individuals, where these will help to provide high quality goods and services, bring fresh ideas and expertise into the system, and support the efforts of those who work in the public sector to raise standards and secure value for money. It will continue to consider such opportunities on their merits.


5.  TARGETS

Question 5.1  Has there been any change to the Government's philosophy towards the use of targets between the publication of the 2004 and 2005 departmental annual reports?

  There has been no change in philosophy, although the Government continually assesses the most effective use of target-setting approaches in the context of its wider agenda for public sector accountability and reform.

  The Government introduced Public Service Agreements (PSAs) in 1998. Since then, the framework has evolved across government so that targets have reduced in number, become more focused, are better supported by performance information and by increased accountability and transparency. PSA targets are important statements of government priorities and outline what departments plan to deliver in return for resources allocated as part of the Spending Review process, but they need to be used appropriately at the local level.

  The 2004 Spending Review took forward the Government's objective of a strong economy and a fair society with stability, security and opportunity for all. Increased resources are being focused on the front-line and will deliver improvements in the services that matter to the public. The 2004 Spending Review also set stretching efficiency targets for all departments to release additional resources to front-line services such as hospitals and schools.

  The 2005 DfES Departmental Report sets out the Government's expenditure plans based on resources allocated in the 2004 Spending Review. It also reports progress against PSA targets and a summary of significant developments including progress towards the achievement of the commitments for 2008 set out in the Department's Five Year Strategy published in July 2004. The Five Year Strategy sets out a major programme of reform radically to reshape the systems for delivering education, training and children's services. DfES remains committed to achieving its PSA targets through its strategic leadership of the system and effective delivery programmes. DfES is working with HM Treasury and the National Audit Office to ensure that the data systems which underlie PSA targets enable the Department to monitor and report performance in the most timely and accurate manner possible.

Question 5.2  How many targets have been set by the DfES and its predecessor departments in each year since 1997-98?

  Including Sure Start and targets transferred from and to other departments following Machinery of Government changes, the numbers of headline PSA targets are:



DfEE
Headline
Targets
DfES
Headline
Targets
Sure Start
Targets2
Shared
Targets
Total

1998 Comprehensive Spending Review (1999-2000 to 2001-02)
11 (incl 3
ES targets)1
12
23
Spending Review 2000
(2001-02 to 2003-04)
13 (incl 4
ES targets)1
4
17
Spending Review 2002
(2003-04 to 2005-06)
123
4
1
17
Spending Review 2004
(2005-06 to 2007-08)
94
5
14


1.  Responsibility for Employment Service (ES) targets transferred to DWP in 2002.
2.  All Sure Start Unit targets joint with DWP.
3.  Includes two SR2002 targets transferred from DH.
4.  Includes Sure Start targets.

Question 5.3  What has been learned by the Department about the benefits and dis-benefits of targets?

  The Government's overall ambition, set out most recently in the 2004 Spending Review, is that the PSA target framework should articulate and drive forward the Government's highest priorities and ambitions for delivery. PSA targets are an integral part of the Government's public expenditure framework, helping to ensure value for money from public services and that outcomes are delivered in return for resources.

  Broad lessons have been learnt about PSA targets. They are a key element of the Department's Five Year Strategy and bring benefits by setting out what it aims to deliver for children, learners and the citizen in return for investment at the front line. They connect the Department directly to outcomes for citizens and provide a powerful encouragement for us to press forward and make sustained progress in a range of important areas. PSA targets need to be ambitious and stretching, but also realistic, achievable and backed by appropriate data and measurement systems. The PSA targets suite was made more "SMART"—Specific, Measurable, Achievable, Realistic and Time specific—in the 2004 Spending Review. At the local level targets need to be designed in a manner so that local communities determine the areas where improvement is required, take ownership of reform and improvement, and link the targets successfully to local accountability and inspection frameworks. It is not necessarily the case that national targets should always be converted automatically to a comprehensive suite of targets at local level.

Question 5.4  Have there been any changes to the performance indicators published by the DfES between the publication of the 2004 and 2005 departmental annual reports?

  Performance indicators underpin the Department's PSA targets and are published as part of the PSA Technical Notes, which set out how performance against each of the PSA targets will be measured. Technical Notes for the 2002 Spending Review and 2004 Spending Review PSA targets are available on the Treasury website: www.hm-treasury.gov.uk/performance/index.cfm.

  The Department's performance indicators reflect the evolution of the Department's PSA targets. Fourteen PSA targets, outlined in the 2005 Departmental Annual Report, were agreed in the 2004 Spending Review, including targets for Sure Start and Children, Young People and Families. The PSA targets aim to continue to raise standards in many of the areas covered by the 2002 Spending Review PSA targets and the Department's new or revised objectives build on these as well as setting out objectives for the Department's new responsibilities for children, young people and families. Individual DfES programmes also use a range of performance indicators, which provide information on various policies and measures.

6.  GOVERNMENT REPLY TO COMMITTEE'S 2004 REPORT (HC 492)

Question 6.1  In its response to the Committee's 2004 Report on Public Expenditure, the DfES stated: "The Government's proposal to introduce a new Dedicated Schools Grant to local authorities and three-year budgets for schools from April 2006 will not centralise school funding. Local authorities will continue to be responsible for the distribution of funding between schools in their area". Is this really true? How much freedom will authorities have to distribute funding outside the DfES's own rules?

  As the answers to questions 1.1-1.5 make clear, local authorities will continue to be responsible for the distribution of funding between schools in their area. As now, local authority distribution formulae will have to comply with the school funding regulations, but these will continue to leave a wide range of issues to local authorities' discretion. The regulations will also continue to allow authorities to use an alternative method where application of the regulations would result in a school or a group of schools receiving anomalous budgets. At present, any alternative method has to be approved by the Secretary of State: under the new arrangements, certain types of alternative method can be approved locally by the Schools Forum if there is a local consensus.

7.  DEPARTMENTAL STAFFING

Question 7.1  How have DfES staff numbers changed in the full period since the Lyons Review, Gershon and other efforts to reform the civil service? What functions (if any) that used to be undertaken by the Department are no longer undertaken? What are the planned DfES staffing numbers for 31.3.06 and 31.3.07?

Staff numbers

  The Department plans staff reductions from its October 2003 baseline of 850 FTE (full time equivalents) by April 2006 and in total 1,460 by April 2008 as the result of the Departmental reform programme. Staffing numbers are set out in the table below.


Period
DfES Staffing (FTEs)

October 2003
4,660
September 2005
3,886
April 2006 (planned)
3,810
April 2007 (planned)
3,680
April 2008 (planned)
3,200


Changing the nature of the Department's work

  When the reforms are complete the Department will be more strategic, providing strategic leadership to the system; smaller, doing less direct delivery and working with simpler systems and processes; professional and expert, providing quality analysis and with real knowledge of how the system works; and strong in our partnerships.

  Examples of changes underway include:

    —  New Relationship with Schools (NRWS) is an example of how DfES is simplifying arrangements across the system. It reduces the requirements that large numbers of schools have to comply with. Instead it focuses each school on the key areas in which it needs to improve. In the process, it reduces demands that Government and local authorities make on schools. For DfES there are fewer policy initiatives with funding attached, and therefore fewer planning operations to run and less detailed monitoring to be conducted.

    —  Our new approach to Children's Services has won support for the Every Child Matters: Change for Children programme from key stakeholders and children and young people themselves. Over the next few years the Department will increasingly move away from detailed direct delivery, of Sure Start and the Connexions Service, to a more strategic enabling role with delivery through children's trusts. We will be simplifying funding streams and inspection arrangements requiring less resource at the centre and on the ground.

Lyons review

  The Department made a commitment in the 2004 Spending Review to relocate out of London and the South East around 800 posts from the Department and its partner organisations by 2010. Good progress in securing commitments to relocate and delivering relocated posts has been made and we are confident that we will meet the commitment. Around 400 posts are committed to relocate by April 2006, of which around 60 have been already achieved. These include around 230 posts from Ofsted being moved from London and the South East to their three regional offices, posts in the Department, the Quality Improvement Agency (being established in place of the Learning and Skills Development Agency) and the Children and Family Court Advisory and Support Service—CAFCASS. Beyond April 2006, relocations will involve further Departmental posts as well as posts in the Qualifications and Curriculum Authority, the Training and Development Agency for Schools (formerly the Teacher Training Agency) and other Non-Departmental Public Bodies.

October 2005





 
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