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Written Ministerial Statements

Monday 12 November 2007

Treasury

ECOFIN (9 October 2007)

The Chancellor of the Exchequer (Mr. Alistair Darling): The Economic and Financial Affairs Council was held on 9 October in Luxembourg. The Financial Secretary to the Treasury attended for the UK. The items on the agenda were as follows:

Implementation of the Stability and Growth Pact

Ministers adopted a Commission recommendation to abrogate the Excessive Deficit Procedure of the United Kingdom under Article 104(12) of the Treaty, and a recommendation for the Czech Republic to take further action in order to end their Excessive Deficit, in accordance with Article 104(7) of the Treaty.

The UK supports a prudent interpretation of the Stability and Growth Pact (SGP) which takes into account the level of debt, the influence of the cycle and the level of public investment. The UK Government welcome the abrogation of the UK EDP.

Public Finances in the EMU

Following their discussion at ECOFIN in July, Ministers agreed Conclusions on the Commission's annual Public Finances Report and accompanying proposals aimed at improving the effectiveness of the preventive arm of the Stability and Growth Pact by effectively applying the revised Stability and Growth Pact.

Quality of Public Finances

Ministers adopted Conclusions on the role that the modernisation of public administration can play in enhancing competitiveness, delivering better services, achieving better value for money and ensuring the control of government expenditure. This follows the discussion at the September Informal ECOFIN in Lisbon, at which the UK welcomed the sharing of experience between Member States.

Developments on the economic and financial situation

Ministers discussed the current economic situation and disturbances in global financial markets, and the possible policy responses to the issues raised. The UK is committed to pursuing an effective, considered global response to these global financial market issues, and believes the Financial Stability Forum provides the best route to pursue these aims.

Better Regulation

Ministers agreed Conclusions on better regulation and its role in improving EU competitiveness. The UK welcomes the calls for further progress to be made both at Member State and EU level towards reducing administrative burdens in the EU.


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Flexicurity

Ministers agreed Conclusions on the economic aspects of flexicurity, which welcomed the Commission's work on developing an approach towards shared principles to develop labour market flexibility alongside support by social systems. The UK believes that fiscal sustainability is critical in the face of Europe's changing demographics.

Dialogues with third countries

The Commission presented Ministers with an update on its ongoing dialogues with third countries, including the USA, Japan, China, India and Russia, and focused on the economic, financial and regulatory aspects of the discussions.

Financial Service— Clearing and Settlement

Ministers agreed Conclusions on Clearing and Settlement, which covered the ECB's proposed Target 2 Securities project, the implementation and functioning of the Code of Conduct, progress on removal of the Giovannini barriers and the ESCB/CESR standards. These initiatives are intended to address deficiencies in the European Clearing and Settlement landscape—an area where the Council has long been pressing for change. The UK welcomes progress in improving the European Clearing and Settlement landscape.

Financial Services - EU arrangements for Financial Stability

Ministers agreed Conclusions on the long-running discussion of how to take forward EU arrangements for financial stability. The UK strongly supports efforts to improve financial stability arrangements, including financial crisis management arrangements in Europe, by ensuring all Member States have robust national crisis management arrangements, and welcomes improvements to cross-border communication and co-operation in financial crises.

ECOFIN

The Chancellor of the Exchequer (Mr. Alistair Darling): The Economic and Financial Affairs Council will be held on 13 November in Brussels. The items on the agenda are as follows:

Lisbon strategy: The new three-year cycle.

The next governance cycle for the Lisbon strategy will run for three years from 2008-2011. The Council will discuss draft conclusions on the next three-year cycle for the Lisbon strategy, prepared by the Economic Policy Committee. It will also take into account a recent European Commission communication prepared at the request of the 2007 Spring European Council.

Globalisation: Capital and labour flows.

The Council will exchange views on the basis of a report on the economic impact of migration prepared by the European Commission, taking into account a paper prepared by the Economic Policy Committee.

Statistics

The Council will be invited to agree conclusions on EU statistical matters, including the 2007 EFC status report on information requirements, the reduction of the statistical burden, EU statistical governance, and the communication of major statistical revisions, as
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prepared by the Economic and Financial Committee. The UK welcomes work to reduce the statistical burden on member states.

Taxation

a) VAT package

The Council will discuss a set of measures that will modernise the EU VAT rules for the cross-border supply of services, with particular focus on proposed changes to the rules for the telecoms, broadcasting and e-services sectors. The UK supports the modernisation of the EU VAT regime.

b) Green taxation: Passenger car related taxes.

Ministers will discuss Commission proposals for a new directive on linking car taxation to CO2 emissions.

c) Reduced VAT rates

Ministers will discuss Commission proposals to extend until 2010 most of the new Member States' derogations for reduced VAT rates.

The UK Government are supportive of the proposal to extend most of the temporary derogations granted to those Member States that acceded to the European Union after 1 January 1995.

Global Navigation Satellite System (GALILEO): Financing aspects

Following the discussion at the July ECOFIN, there will be a further exchange of views on the financing of the Galileo project. The UK will continue to express concern with the Commission's financing proposal and argue that the option of reprioritising funds from existing programmes must be considered.

Presentation of the Annual Report by the Court of Auditors Concerning the Financial Year 2006.

The Council will receive a presentation from the European Court of Auditors on the 2006 general budget. This will be the first presentation that Ministers will hear on the 2006 budget, and will mark the start of the annual discharge process.

Double Taxation Convention (United Kingdom and Moldova)

The Financial Secretary to the Treasury (Jane Kennedy): A new Double Taxation Convention with Moldova was signed on 8 November 2007. After signature, the text of the Convention was deposited in the Libraries of both Houses and made available on HM Revenue and Customs’ website. The text of the Convention will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

Children, Schools and Families

School Funding Settlement for 2008-09 to 2010-11

The Minister for Schools and Learners (Jim Knight): I am announcing today the first three year school funding settlement, for 2008-09 to 2010-11. This settlement and the capital settlement announced on 10 October
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will mean that, by 2011, total funding per pupil will have increased nationally to £6,600. Education spending is projected to rise as a proportion of GDP from 4.7 per cent. in 1996-67 to 5.6 per cent. by 2010-11. And for the first time, schools will have three year budgets, enabling them to plan further ahead, to take better long-term decisions, to use their budgets more efficiently and strategically over a three-year period.

On 25 June this year I announced to the House a package of measures for school funding for 2008-09 to 2010-11. The key features were: a continuation of the spend-plus methodology for DSG distribution, coupled with a fundamental formula review, to start in the new year; a minimum funding guarantee (MFG) dependent on average cost pressures, but with efficiency taken into account; further measures to broaden the membership of schools forums, particularly from early years and 14-19 stakeholders; a staged approach to the reform of early years funding; and additional funding for diplomas to be provided through a specific formula grant, with local discretion on how this funding is used to pay for provision.

This statement sets out the Government’s decisions for the next three years on: the overall increase in schools funding, the dedicated schools grant (DSG) and other grants; details of funding for our key priorities; and the level of the MFG for schools. Details of allocations of both the DSG and specific grants to authorities and schools are being sent to local authorities today and I am placing copies in the Library of the House.

The overall level of schools funding will increase by 4.3 per cent. in 2008-09, 4.7 per cent. in 2009-10 and 5.3 per cent. in 2010-11. This includes funding for our key priorities: the personalisation of teaching and learning, support for all pupils to make good progress, the extension of the early years offer to parents, and extended children’s services provided from schools. It also takes account of the additional costs of the expansion of the academies programme—our plans allow for a further 50 academies to be opened in each of the next three years, bringing the total to 230 academies open by September 2010.

The strong focus on personalising teaching and learning to the needs of every child will continue over the next three years, with additional sums of £330 million, 535 million and 912 million earmarked within DSG. This additional funding is to support universal roll-out of a personalised offer to all pupils—including those with special educational needs—and will be distributed on the basis of numbers of 5 to 15 year olds. In taking decisions on allocations, local authorities and their schools forums should consider our priorities: ensuring all children are making good progress; early intervention to prevent children from falling behind, especially those with special educational needs; targeted support for specific groups including those ethnic minorities at particular risk of poor outcomes, white working class children, children in care; and ensuring that the school workforce has the skills and confidence to address the needs of children from these groups.

To complement this increased funding through DSG, we will roll-out funding to help improve the rate at which children progress, ensuring all children can meet their potential, and those who are behind expectations, or are falling behind, get back on track. A current pilot of this approach will run until July 2009.
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We will then make available £138 million in 2009-10, and £315 million in 2010-11 to improve progression in schools. By 2010-11, this funding will enable an additional 300,000 under-attaining pupils a year to benefit from 1:1 tuition in English, and a further 300,000 pupils in Maths. Taken together, we will be spending an additional £1.2 billion on personalisation and progression by 2010-11. There will be support for children who have fallen behind in basic literacy and numeracy through the national roll-out of “Every Child a Reader and Every Child Counts”, with £79 million being made available in 2010-11 via the Standards Fund. Further funding will be announced shortly for the “Every Child a Writer” programme.

The increased funding for progression will be delivered through the Standards Fund for the next three years, as will increases in funding to extend the entitlement to free nursery education from 12 1/2 to 15 hours, announced by the Minister for Children, Young People and Families, on 7 November, and for extended schools. Our aim is that from 2011-12 these funding allocations will be mainstreamed into the DSG. We will consider how this can best be achieved as we take forward work on implementing the funding system for 2011-12 and onwards, following the fundamental formula review which starts in January 2008.

Narrowing the attainment gap for pupils from disadvantaged backgrounds is one of the strategic objectives of my Department and is a key priority for the Government. The most significant attainment gap is between deprived and more affluent pupils—including those in generally affluent authorities. We are therefore allocating £40 million in each of the next three years to support children from deprived backgrounds who attend schools in less deprived local authorities whose overall level of deprivation is in the bottom third, as defined by our new indicator of income deprivation, based on tax credit data. Our strong expectation is that this additional funding will be directed to those schools with the most disadvantaged pupil intakes. Alongside this additional money for deprived children in less deprived authorities, we will continue to press all authorities to properly reflect in their local funding formulae the existing funding for deprivation delivered through DSG.

For authorities whose spending was below the formula in 2005-06, we have closed half of that gap over the past two years: we will complete this process over the next three years, with additional sums of £20 million, 40 million and 60 million.

Two further developments of the funding system take account of changing patterns of demography. First, all authorities will receive a minimum cash increase of at least 2 per cent. irrespective of their pupil numbers: that will particularly help those authorities where pupil numbers are rapidly declining. Secondly, for authorities experiencing rapid growth in pupil numbers, or a significant influx of children with English as an additional language, there will be an exceptional circumstances grant, paid out every autumn.

As well as the additional funding for ministerial priorities, we are continuing to provide all local authorities with increases for schools’ core funding. I announced in June that the MFG would continue to deliver a minimum per pupil increase for all schools in each of the next three years, which would reflect average cost pressures. Our assessment of cost pressures includes an assumed
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efficiency gain of 1 per cent. for each of the next three years, reflecting the substantial improvement in efficiency which we expect to be achieved across the schools sector and the public sector as a whole. It is based on a cautious but realistic assessment of the wide range of pay and non-pay pressures that schools will face across the next three years.

The result is an MFG for all schools set at 2.1 per cent. for each of the next three years, which is affordable within the comprehensive spending review settlement, while allowing us to allocate significant additional funding increases to our key priorities. The settlement provides for the first time three years of funding allocations, and will help schools to plan how they will meet the range of cost pressures they face from pay and non-pay over this period as a whole.

The Department is working with our external partners, including representatives of headteachers and governors to develop support mechanisms for schools to help them make the best use of their resources to improve outcomes for pupils. The aim will be to provide schools with access to a range of support that is tailored to their individual circumstances, exemplifies good practice and provides opportunities for peer review and support. We will announce further details later in the year.

We have received the detailed recommendations of the STRB on teachers’ pay from September 2008 and I am grateful to them for their work. We will be announcing our response to the STRB’s report when we have carefully considered their detailed recommendations within the wider context of the Government’s approach to public sector pay. We will ensure that the Government response to the STRB's recommendations is consistent with the MFG we are announcing today.

As we announced in June, all authorities will receive a basic increase in their DSG per pupil made up of: the MFG at 2.1/2.1/2.1 per cent. plus an additional 1.0/0.8/0.8 per cent. of headroom; each authority will therefore receive a basic increase of 3.1/2.9/2.9 per cent. Funding for ministerial priorities is equivalent to an additional 1.5/0.8/1.4 per cent. per pupil on average, giving an average increase in DSG per pupil for each year of 4.6/3.7/4.3 per cent.

Alongside the increases in DSG for all authorities we will increase direct funding to schools through the School Standards Grant (SSG) and School Standards Grant Personalisation (SSG (P)), in line with the level of the MFG. Each authority’s allocation of School Development Grant will be increased in line with the MFG, and all schools are guaranteed the same cash allocation per pupil year on year: this will allow some updating of the distribution of this grant, while continuing to protect schools.


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