Capital funding for schools Contents

Conclusions and recommendations

1.We are not convinced that the Department for Education is using its funding in the most coherent and cost-effective way to provide the right number of school places in the right areas at the right time. Between 2010 and 2015, the Department for Education (the Department) and local authorities created 600,000 new school places at a cost of £7.5 billion, mostly in good or outstanding schools. A further 420,000 places will be needed between 2016 and 2021, and there will be more emphasis on secondary schools where places are more costly and complicated to provide. There is pressure on school places in some local areas, with large amounts of spare capacity elsewhere. Some local planning areas have fewer than 2% of their places unfilled (the level that the Department funds, to allow a margin for operational flexibility), while others have spare capacity of over 20%. Spare capacity can have an impact on the financial sustainability of schools as a school’s funding is linked to the number of pupils it has. The Department could not explain to us how it would judge whether an area has too many places or its plan to make sure that places are being created in the right areas. It said that it would expect local authorities to take action if there was too much spare capacity, even though local authorities have no control over the opening of free schools or the number of places in academies or free schools in their area. While the Department is spending significant funds in creating 500 more free schools, even in areas with no shortage of places, existing schools struggle to live within their budgets and carry out routine maintenance.

Recommendation: The Department should demonstrate to us how it will work effectively with local authorities to understand local demand for school places. It should also define more clearly the range of surplus places that local authorities should seek to maintain, how the Department will fund these, and the circumstances where higher or lower levels of spare capacity would be tolerated.

2.It is not clear precisely what the Department means when it says it aims to provide parents with choice and whether it is creating choice fairly and cost-effectively. Free schools are helping to meet the need for new school places but are also creating spare capacity. The Department estimates that 57,500 of the 113,500 new places in mainstream free schools opening between 2015 and 2021 will create spare capacity in the surrounding area. It is not clear how much spare capacity is needed to provide parents with meaningful choice or how choice is being provided in those parts of the country that need it most. This is particularly important because free school places are more expensive—on average a place in a secondary free school costs 51% more than places provided by local authorities and a place in a primary free school costs 33% more. The higher cost is mainly because free schools tend to involve the purchase of land. In addition, the Department does not yet know whether the greater choice and competition created by free schools is improving educational standards.

Recommendation: For each successful application, the Department should quantify and publish the extent to which the proposed free school aims to meet local needs for new school places, greater parental choice and improved educational standards. The Department should also set out how it weighs up the costs and benefits of choice in assessing applications, and how it makes sure that it creates choice in a cost-effective and fair way across the country.

3.On average, the Department has paid nearly 20% more for land for free schools than official valuations. The Department often buys sites for free schools but land is often scarce and costly in the areas where new schools are wanted, especially in London. The Department spent £863 million on 175 sites for free schools between 2011 and 2016. The average cost of these sites was £4.9 million, but 24 sites cost more than £10 million each, including four that cost more than £30 million. Landowners are able to push up prices in the knowledge that the Department has few, if any, sites to choose from. The Department is in a weak negotiating position and commonly pays well in excess of the official valuation. On average it has paid 19% over the official valuation, with 20 sites costing over 60% more. The Department said this was because the official valuation for each site was based on past deals for similar premises and on the site’s existing use, and did not equate to the true market value. It expects to spend a further £2.5 billion on land from 2016 to 2022, putting it in the same spending bracket as the top five homebuilders in the UK. To help manage these land purchases more effectively the Department has set up a company called LocatED. It expects the company will be able to attract staff with specialist property expertise by paying them at a higher rate than civil service rates.

Recommendation: By the end of December 2017, the Department should set out how it will assess the performance of LocatED, including whether it is able to recruit and retain staff with the specialist skills it requires and the metrics it will use to judge whether LocatED is securing value for money in acquiring sites for free schools.

4.The current arrangements mean that housing developers may not be paying their fair share towards the cost of school places. Local authorities rely on contributions from housing developers, who have to help fund the cost of school places for children living in new housing developments. Local authorities were expected to spend £174 million in 2015–16 on school places using ‘section 106 contributions’ from developers. In April 2015 the Department for Communities and Local Government introduced a restriction on the number of section 106 contributions that can be pooled towards a single infrastructure project like a school. The way that the new arrangements work is reducing the amounts that local authorities receive from developers. The Department told us that government departments are discussing the question of pooling contributions and that it expects the Department for Communities and Local Government to make a policy statement in summer 2017.

Recommendation: The Department for Education should work with the Department for Communities and Local Government to crack down on loopholes that may allow some developers to contribute less than they should to the cost of new school places.

5.The Department still does not know enough about the state of the school estate, meaning that it cannot make well-informed decisions about how best to use its limited resources. The Department now has a better understanding of the condition of school buildings after completing a survey of the estate in 2014. This property data survey estimated that it would cost £6.7 billion to return all school buildings to satisfactory or better condition, and a further £7.1 billion to bring parts of school buildings from satisfactory to good condition. Much of the school estate is over 40 years old, with 60% built before 1976. The Department estimates that the cost of dealing with major defects will double between 2015–16 and 2020–21, even with current levels of investment, as many buildings near the end of their useful lives. The property data survey did not assess the safety or suitability of school buildings or the extent of asbestos. Over 80% of schools responding to a separate survey by the Department had asbestos, with 19% reporting that they were not complying with asbestos management guidance. However, only a quarter of schools responded to the survey, meaning that the Department does not have a complete picture. The Department estimates that it would cost at least £100 billion to replace the entire school estate which it believes would be the only way to eradicate asbestos from school buildings. The Department is undertaking a second property data survey but, until this is complete, it cannot assess reliably how the school estate is changing and does not know the extent to which its funding is helping to improve the condition of school buildings.

Recommendation: The Department should set out a plan by December 2017 for how it will fill gaps in its knowledge about the school estate in areas not covered by the property data survey. Specifically it needs to understand the prevalence, condition and management of asbestos, and know more about the general suitability and safety of school buildings.

6.There is insufficient focus on routine maintenance to keep school buildings in good condition and prevent more costly problems in the future. The Department uses its capital funding to address urgent needs, rather than to undertake preventative work, and prioritises repairing, refurbishing or rebuilding schools in the worst condition. Meanwhile, schools have to meet the cost of preventative maintenance and repairing smaller defects from their revenue budgets. Revenue budgets are under significant and increasing pressure, with schools needing to make efficiency savings of £8 billion per year by 2019–20, on which we recently published a separate report. This all means that school leaders may not be incentivised or able to maintain their buildings and prevent more costly damage from deterioration. The Department has had limited mechanisms and a lack of information to hold local authorities and academy trusts to account for the state of their school buildings.

Recommendation: The Department should use information, including from the property data survey, to develop a robust approach for holding local authorities and academy trusts to account for maintaining their school buildings, including how it will intervene if they are not doing so effectively. It should also assess whether schools can afford the level of maintenance necessary given the real-terms reductions in funding per pupil.

7.The Department does not know enough about the quality and suitability of new school buildings, provided under the Priority School Building Programme and the Free Schools Programme, to demonstrate value for money. The Department funds new school buildings through two central programmes—the Priority School Building Programme (PSBP) and the Free Schools Programme. So far, the PSBP has delivered 178 new schools, although it took a long time for the programme to get started. Some schools were left to deteriorate when the Government cancelled the previous programme, Building Schools for the Future, and had to wait a long time for their new buildings. PSBP schools appear to be one-third cheaper per square metre than Building Schools for the Future schools, but the comparison is not on a like-for-like basis. For example, some costs have been shunted to local authorities who may pay for access roads, security and new furniture. This approach may not be sustainable given the pressure on local authorities’ budgets. PSBP schools are based on standard designs and may not meet schools’ needs in full. They are smaller than Building Schools for the Future schools with less communal space. We were concerned about the evidence provided of schools built without adequate on-site outdoor space and that the Department defended this as an acceptable compromise. In our view setting up new primary schools without a playground or secondary schools without sports facilities is storing up problems for the future and limits the effectiveness of schools to deliver the full curriculum. In addition, when the Department opens free schools it sometimes uses properties that were previously used for other purposes, such as office accommodation and police stations. It does this when suitable land is in short supply, and 233 free schools have opened in temporary accommodation for the same reason. The Department has not fully evaluated the quality and suitability of new PSPB and free school buildings after they have opened.


The Department should report back to us by the end of December 2017 on the quality and suitability of new school buildings provided under the Priority School Building Programme and Free Schools Programme, including the temporary accommodation that is being used for some free schools.

The Department should review its criteria for new schools and consider setting tougher standards for facilities so that these schools stand the test of time. Value for money in educating children needs to be measured in a longer timescale. The fact that the Department is frequently paying over the odds for sites and at the same time building schools without the full suite of facilities concerns us.

24 April 2017