Education Services Grant Transition 2017/18

Item 9

Newcastle Schools Forum

7th December 2016

Education Services Grant Transition 2017/18

Report by:Julie Cordiner

1. Recommendation

1.1That the Schools Forum:

• Indicates views in principle on central retention of Retained Duties budgets for 2017/18, following the transfer of £15 per pupil from Education Services Grant to Newcastle’s allocation of Schools Block Dedicated Schools Grant for 2017/18;
• Notes the services and proposed budgets within the former General Education Services Grant which will need a decision from LA maintained schools on de-delegation at the Schools Forum meetingin January.

1. Changes to Education Services Grant

1. The Central Budgets report deals with budgets which have historically been retained by the LA prior to school budget shares being calculated. These apply to schools and academies. The De-delegation report deals with budgets delegated initially to all schools,for which LA maintained schools can pass the funding back (‘de-delegate’ it) from budget shares to the LA for the relevant services.

2.2For the first time in 2017/18, changes to Education Services Grant mean that there will be additional budgets which require approval from the Schools Forum for funding to be retained by the LA. However, these are not discretionary budgets – they are statutory duties which the LA has to undertake. This section explains the funding mechanisms and a later section outlines the services involved and the process for approval from relevant Forum members for each category.

Retained Duties ESG transfer

2.3The Secretary of State’s announcement of the school funding arrangements for 2017/18 included the news that the Retained Duties Education Services Grant (ESG) would be transferred into the Schools Block of the Dedicated Schools Grant (DSG). This relates to LA statutory services previously funded from ESG which are performed on behalf of all pupils, regardless of the status of their school.

2.4Newcastle’s Retained Duties ESG allocation of £15 per pupil for this grant in 2016/17 has been added to the Schools Block baseline for 2017/18. The pupil numbers used are:

• October 2015 pupils aged 3-19 in LA maintained schools and academies, including nursery classes in primary schools and nursery schools.
• October 2015 planned places in special schools and academies
• January 2016 planned places in PRUs and AP academies.

2.5This increased the Schools Block Unit of Funding by £15 per pupil, and resulted in a total transfer of £572k for the 2016/17 baseline.

2.6As can be seen above, the baselines relate to pupil data from October 2015, as a basis for calculating the increase in Schools Block DSG per pupil within the 2016/17 baseline. In reality the approvedRetained Duties central budgets will need to reflect the pupil numbers as at October 2016.

General ESG cessation

2.7General Education Services Grant is paid to LAs for functions undertaken for LA maintained schools only. The rates were originally based on what each individual LA recorded in the Section 251 budget statement as planned expenditure. Later a national average rate was established. This grant, like the Retained Duties grant, was non-ring fenced and therefore the LA was not required to reconcile expenditure to the new grant rate.

2.8Over time, the rates have been reduced, and now stand at the following:

• £77 for pupils aged 3-19 in mainstream LA maintained schools
• £327.25 for planned places in LA maintained special schools
• £288.75 for planned places in LA maintained PRUs.

2.9Academies receive the same rates as above for the duties they undertake instead of the LA, and also receive protection against reductions where their historic ESG rates were higher. The basis of protection can be seen in the technical note at

2.10The LA General ESG will end from September 2017 and only a transitional sum will be received in 2017/18 for the summer term. Academies will also lose their General ESG, but on a tapering basis up to 2020.

2.11In recognition that these are statutory duties which cannot cease, the LA is to be permitted to charge LA maintained schools for the lost grant from September 2017. This will be on a similar basis to de-delegation, but should also apply to nursery schools, special schools and the PRU (while LA maintained).

2.12DfE intend to include the detail of this requirement in draft Schools and Early Years Finance regulations 2016 which are due for consultation. Until we receive this, it is not possible to state definitively how much per pupil will need to be contributed by LA schools. Whatever the rate, it will only be for 7/12ths of the 2017/18 financial year; the full year effect will not be felt until 2018/19.

2.13For the purposes of this report, therefore, we have outlined below the duties that are included in both the Retained Duties and General categories of the former ESG. In order to establish the likely position for staff employed in these services, we are asking for an indication in principle at this meeting on whether de-delegation is likely to be approved, given the timescales for consulting with staff.

2.14If the request is declined, the LA will be able to appeal to the Secretary of State, and while this is progressing, consultation can commence on any potential staff reductions. This will preserve the LA’s position in case any savings do have to be found as a result of DfE’s decisions on functions which may or may not continue, and the Schools Forum decision making process.

1. Benchmarking of expenditure
2. Benchmarking from the Section 251 budget statement data for 2016/17 reports on Newcastle’s net expenditure per capita on these functions compared to statistical neighbours and national averages.

3.2Caution needs to be exercised when interpreting the benchmarking data, because the guidance can be interpreted in different ways by different LAs. There can also be alternative sources of funding for the services being benchmarked. Some of the income can be netted off according to the guidance, but ESG grant income cannot be deducted, making comparisons difficult.

3.3It is not possible to separate out Retained Duties and General ESG functions in the benchmarking data, because they are combined for some categories, e.g.:

• Education Welfare Service includes checking of LA school registers (General ESG) as well as the Retained Duties for attendance by all pupils (regardless of whether they attend a school or academy).
• The S251 heading of school improvement includes the Retained Duties LArole as outlined in the Schools Causing Concern guidance (the identification of schools and academies giving cause for concern) and the General ESG role of intervention and support to LA maintained schools.
• The S251 Finance elements within statutory & regulatory duties include the Retained Duties of budget preparation for the education service, audit of grant claims, and the Chief Financial Officer’s statutory responsibilities for all schools and academies. They also include General ESG functions such as passing on LA school pension contributions to schemes, monitoring compliance with the Scheme for Financing Schools (including agreeing licensed deficits), and closure of accounts for LA schools.

3.4Noting the above caveats, the key areas of benchmarked expenditure are shown in Table 1. Education Welfare and School Improvement are higher than comparators while Asset Management and Statutory/Regulatory Duties are significantly lower. Therapies costs seem high, but this heading is well known for inconsistent treatment in Section 251;some LAs fund these costs fromthe High Needs Block. Alternatively, it could reflect our issues with Health funding.

Table 1: 2016/17 Benchmarking of services formerly funded from ESG
Newcastle / StatN/br median / National Average
Education Welfare / £20 / £14 / £15
Asset Management / £3 / £7 / £10
Statutory/regulatory duties / £12 / £32 / £58
School improvement / £38 / £27 / £34
Therapies & other health-related services / £10 / £0 / £3

1. Retained Duties central retention
2. Annex A attached to this report is the DfE’s current statutory guidance document outlining the key functions within the ESG categories. The draft regulations may change some aspects of this but in response to an enquiry about this, DfE have advised the LA to use Annex A. That suggests the changes will not be significant.

4.2The Retained Duties responsibilities that remain with the LA for all schools and academies are shown in Table 2 below:

Table 2: Retained Duties functions
Education welfare services / Asset management / Statutory and regulatory duties
Prosecutions for non-attendance
Tracking children missing from education
Other statutory duties – for example child employment / Strategic capital programme planning
Management of BSF schemes and PFI contracts
Functions in relation to Academy leases / Strategic planning of education services including the education element of the Director of Children’s Services and other statutory/regulatory duties relating to both maintained schools and Academies.
Planning for education services on an area-wide basis
Finance, HR and legal functions relating to central services that do not transfer to Academies
Maintenance and development of local school funding formula
Standing Advisory Council for Religious Education
Therapies and other health-related services
Speech, physiotherapy andoccupational therapies not met by Health

4.3An analysis is being undertaken of the relevant budgets for functions within the Retained Duties category. Where appropriate, salary costs are being apportioned between this and General ESG using best estimates. Further information is required from services in order to achieve a reasonable apportionment, but to finalise it we need decisions from DfE on what is to be included. This will be advised in the consultation on draft regulations.

4.4The benchmarking data indicates that Newcastle is lower than both its statistical neighbour median and the national average for statutory and regulatory duties, which forms the majority of Retained Duties expenditure. Because the grant is non ring fenced, some LAs can spend more or less than the amount received.

4.5Schools Forum members are asked to consider the functions defined as Retained Duties and indicate in principle whether they agree to these statutory duties being funded from central retention. There is no impact on school budgets because the funding has been transferred into DSG. The amount being requested is £15 per pupil multiplied by the October 2016 rolls, which is exactly the basis on which funding will be calculated when final DSG allocations are issued in December.

1. General ESG retention
2. The items in Annex A marked as Statutory obligations of local authorities for maintained schools are those which are currently funded from General ESG. In the announcement of the White Paper Educational Excellence Everywhere, Ministers proposed that when all schools were forced to become academies, the LA role in school improvement would reduce significantly.

5.2The White Paper has been abandoned, but the funding announcement for 2017/18 confirmed the cessation of General ESG from September 2017, a substantial part of which covers school improvement for LA maintained schools.

5.3The school funding operational guidance for 2017/18 indicated that the consultation on the draft Schools and Early Years Finance Regulations would provide new definitions of functions for the former ESG grants. The decisionsare needed in order to agree the de-delegation of the General ESG functions.

5.4Until this guidance is received, it is not possible to present a calculation of the amount to be requested from LA maintained schools. We would welcome a discussion with Schools Forum LA school representatives on their views in principle, since the LA may need to organise an appeal to the Secretary of State and issue consultation notices to staff if there is a risk of losing the funding.

5.5It is worth noting that while this recharge would represent a pressure for LA maintained schools, academies will face a similar problem with the withdrawal of their General ESG funding between now and 2020.

1. Next steps

6.1On the basis of the discussion at this Forum meeting, the LA will decide whether to initiate consultation processes for staff involved in the statutory functions. Any changes relating to Retained Duties will take effect from April unless Schools Forum agrees an amount for the summer term.

6.2Changes in General ESG for LA maintained schools have a slightly longer timescale for staff consultation, as they do not come into effect until September. However, the amounts need to be established in January because the LA has to incorporate them as de-delegation in the APT return to DfEto be submitted on 20th January.

6.3Officers will continue to refine the apportionment of budgets for statutory functions between Retained Duties and General ESG categories while waiting for the draft regulations to confirm which functions DfE will allow LAs to include in central retention and de-delegation.

6.4Once this information is available, and cleansed census data is supplied by DfE, a complete assessment will be presented to the Forum meeting in January for a decision.

1. Recommendations

7.1That the Schools Forum:

• Indicates views in principle on central retention of Retained Duties budgets for 2017/18, following the transfer of £15 per pupil from Education Services Grant to Newcastle’s allocation of Schools Block Dedicated Schools Grant for 2017/18;
• Notes the services and proposed budgets within the former General Education Services Grant which will need a decision from LA maintained schools on de-delegation at the Schools Forum meeting in January.

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