Item 4
Newcastle Schools Forum
19 January 2016
Schools Budget 2016/17
Report by: Julie Cordiner
1. Recommendation
1.1 That the Schools Forum:
- Notes the analysis of the budget situation for 2016/17, including the context, available resources and anticipated budget requirement across the non-delegated range of services;
- Notes the budget process outlined in section 3;
- Approves the treatment of the 2016/17 budget as a transitional budget, pending the changes in DSG and school funding arrangements;
- Gives views on the high level principles in section 4 which the LA can consider when taking decisions, and suggests any additional principles that are appropriate;
- Gives views on the proposals to balance the budget for 2016/17.
2. Background
2.
2.1 The context for the 2016/17 budget setting process is characterised by considerable uncertainty over the future levels of funding for Newcastle schools, following confirmation of the government’s intention to implement a national funding formula (NFF) from 2017/18. A DfE consultation paper is expected in January or February. When this is received, an open briefing will be held for all schools; this will assist in drafting the response from Newcastle, prior to approval by the Schools Forum.
2.2 Although the government has referred to a transitional phase for the NFF, no further information has been published on what this might mean. There are several different ways in which an NFF might be implemented, for example with varying degrees of local discretion, different levels of Minimum Funding Guarantee and national or local MFG/capping calculations.
2.3 The government has also announced its intention to implement a national formula for Early Years and High Needs; uncertainty over how the three formulae will interact makes it very difficult to predict how funding will change. In particular, there are concerns about making High Needs allocations to LAs on a formulaic basis.
2.4 Until we see the proposals, it would be risky to make any assumptions about their impact for Newcastle. For example, there is no guarantee that DfE will adopt the F40 group’s proposed model.
2.5 Schools are already absorbing known pressures in relation to changes in national insurance, pension contributions, and the Living Wage, while facing continuing pressure to achieve improvements in standards of attainment in order to be judged at least Good by Ofsted.
2.6 Some schools may be required to pay the new apprenticeship levy announced in the Autumn Statement; clarification is awaited as to how the employer will be defined in relation to the £3m paybill threshold. If this is assessed at the level of a Trust, even small primary schools could be subject to the levy.
2.7 The SLA inflation rate has been set at 1.5% for 2016/17, with the usual arrangements for discussions at Contracts Sub-Group if any service needs to justify an increase above this figure.
2.8 The per-pupil DSG rates have remained static (‘flat cash’), so this will not cover inflationary pressures. The Autumn Statement Blue Book outlines DfE’s plans to address this:
‘The government will help schools to make savings on procurement, including by exploiting economies of scale. In 2016 the government will publish a set of specific actions to support school leaders target over £1 billion a year in procurement savings by the end of the parliament through benchmarking, guidance and improved framework contracts.’
2.9 On January 12th, DfE published a tool to help schools to compare their efficiency with other similar schools. This can be found at:
https://www.gov.uk/government/publications/schools-financial-efficiency-metric-tool. Once schools have had an opportunity to explore the tool, the LA can facilitate discussions on how we can work together on a range of areas to improve efficiency further.
2.10 Rising rolls and new housing developments will require careful management of school capacities. We are also experiencing significant increases in demand for specialist placements in ARCs, special schools and the PRU, but there is no corresponding increase in high needs funding allocations. If these trends continued, it would result in more money being transferred each year out of delegated school budgets and into the high needs budget, to the point where all schools are on the Minimum Funding Guarantee.
2.11 Reviews of high needs and alternative provision are being progressed urgently through the High Needs sub group to address this for the future and achieve a sustainable position. It will be important to involve all types of school in the reviews, since everyone is affected to some degree.
2.12 The local authority continues to manage significant budget cuts, against a backdrop of the government’s intention to review LA duties in education so that further savings can be made in the Education Services Grant. An initial reduction in this grant has been implemented, moving from £87 per pupil to £77 per pupil, although academies will continue to receive protection in 2016/17.
2.13 Lord Nash recently provided some clarification on future LA responsibilities in a House of Lords debate:
“The Prime Minister has made clear that our ambition is that, in time, every school will have the right to become an academy. Given that ambition, it is right that we look at how we might reform the role of local authorities in education, although there is no intention of taking them out of education totally.
In a situation at some stage in the future where all schools were academies, obviously local authorities would not be running schools. However, we certainly anticipate them continuing to have a role in the sufficiency duty, admissions, SEN and safeguarding.”
2.14 Lord Nash added that the government does not plan to convert every school into an academy immediately, but that local authorities' role will reduce as regional schools commissioners take on more responsibility. The LA’s total ESG will reduce by £77 per pupil in each school that converts to academy status. In many services, costs do not change in line with pupil numbers, but are more usually linked to the number of schools supported. So it is not always possible to reduce costs in direct proportion to the lost grant.
2.15 Given these challenges and the urgency of budget setting for 2016/17 to comply with the deadline for the statutory return to DfE for the school funding formula, it is recommended that we regard 2016/17 as a transitional year, without any commitment to continue the decisions in subsequent years.
2.16 As further information becomes known during 2016 about the likely future levels of DSG and the mechanics of the NFF, we will be able to develop a medium-term strategy across all aspects of the budget.
2.17 The authority is considering how it can support schools in managing potential reductions in funding, such as by providing further tools and guidance on medium term financial planning, linked to curriculum and school improvement planning.
3. Budget setting process
3.1 In order to set the budget and identify the amount available for school budget shares, the following elements need to be determined:
i. Central budgets to be retained by the LA for specific functions
ii. Growth Fund amount and criteria
iii. Falling Rolls Fund amount and criteria
iv. De-delegated budgets to be deducted from maintained mainstream school budget shares
v. Available funding: Dedicated Schools Grant and any carried forward balance (surplus or deficit) on the 2015/16 DSG
vi. Impact of data and technical changes on the school funding formula
vii. Determining the spending requirement for the Early Years Budget and High Needs Budget
viii. Balancing the total spending requirement against the available funding to identify whether data changes in the school funding formula can be mitigated.
3.2 Items i to iv are decisions for the Schools Forum (the fourth is for maintained mainstream school members only); a separate report has been prepared for each of these and decisions must be made at this meeting.
3.3 Items v to viii are the LA’s responsibility. However, it is important to take soundings from school representatives on the high level principles to be followed when taking the final decisions.
3.4 This report therefore explains the budget setting process and identifies the options for balancing the budget, setting out the high level principles to be considered. Schools have the opportunity to debate these and advise the LA.
3.5 After listening to schools’ views expressed at this meeting, the authority will take decisions on the total available for delegated budgets. Officers will submit the proforma to DfE on 21st January, then following confirmation that the formula is compliant, will issue school budget shares with the usual information pack. The target date is 24th February.
4. High level principles to be adopted
4.1 It would be helpful to receive views from the Forum on some high level principles which the authority can follow when taking final decisions on balancing the Schools Budget for 2016/17. Not only will this be good practice in explaining the approach to others, but it is possible that some of the figures used in this report will change before we set the budget and submit the formula proforma to DfE, and LA officers can refer to them for guidance.
4.2 The principles identified so far are listed below; Forum members may wish to suggest others.
· 2016/17 will be treated as a transitional year and decisions will be reviewed for 2017/18 with full consultation with schools, in the light of the national funding formulae for schools, early years and high needs, and any other changes in school funding arrangements and local circumstances.
· The budget will be balanced to the available resources, including any surplus or deficit brought forward from previous years, to avoid setting a deficit budget.
· Delegation of funding to schools will be maximised where possible.
· AWPU funding will be adjusted to reflect demographic changes, to ensure schools receive at least the basic entitlement for additional pupils.
· Other formula factors will be rebalanced according to data changes and available resources.
· Decisions on non-AWPU factors will take into account known trends that will impact on the need to spend. For example, projected increases in migration would suggest the EAL pot should be increased in line with the higher numbers of eligible pupils.
· Priority will be given to services for vulnerable children.
· Where a short-term decision is taken for expediency, commitment will be given to undertake a review to establish the medium-term strategy for a service, ensuring it operates efficiently and effectively and delivers value for money.
5. Available funding
5.1 The Dedicated Schools Grant allocations for Newcastle for 2016/17 are shown in Table 1. The 2015/16 figures reflect the final allocations after updates by DfE during the year, for example the transfer for non-recoupment academies and updating of Early Years Block allocations for the January 2015 census.
Table 1 – DSG allocations 2016/172016/17
£m / 2015/16
£m / Change
Schools Block / 154.201 / 151.008 / +3.193
Early Years Block / 15.558 / 15.558 / -
High Needs Block / 29.892 / 30.145 / -0.253
Non-Block (NQT Induction) / 0.047 / 0.047 / -
Total DSG / 199.698 / 196.758 / +2.940
5.2 The Schools Block has increased by £3.193m because there were 677 additional pupils in the October 2015 census return compared to the previous year. The 2016/17 per pupil grant of £4,716.94 is the same as the recalculated 2015/16 allocation (after the funding transfer for three non-recoupment academies).
5.3 The Early Years Block shows no increase, because both years’ allocations are provisionally based on January 2015 pupil numbers. The 2016/17 final Early Years allocation will be based on 5 months of January 2016 data and 7 months of January 2017 data, with adjustments of grant made by EFA at the year end. This block includes the Early Years Pupil Premium, but schools’ Pupil Premium is allocated outside of DSG.
5.4 The High Needs Block takes the 2015/16 allocations as the starting point, but adjustments have been made relating to non-maintained special schools: a change from residency to location basis, and to remove funding paid by EFA. There was no process this year for applying for an increase in places in maintained schools.
5.5 The High Needs Block has reduced by £254k. There could be further adjustments during the year to reflect academy conversions, but this should be budget neutral, as the responsibility for paying place-led funding will move to EFA along with the grant.
5.6 Within the High Needs Block allocation is Newcastle’s share of an additional £92.5m made available by DfE in 2016/17, providing an extra £480k. This is badged as extra top-up funding for specialist places (only place-led funding of £10k was allocated for new places in previous years). Without this, we would have faced a reduction of £733k in high needs funding.
5.7 However, the extra £92.5m has been distributed on total pupil numbers, rather than targeted to high needs pupils. An additional £47m was also allocated nationally in 2015/16 using this mechanism. The distribution of the High Needs Block is therefore gradually being skewed towards authorities with high pupil numbers and lower needs. This could indicate the likely direction of travel in the new formulaic approach to the High Needs Block.
5.8 DfE treats the allocation for NQT induction as a non-block item. As in 2015/16, this is a delegated budget, so it has been included in the Schools Block for the purposes of our budget calculations.
5.9 The overall 2016/17 position is a total DSG allocation of £199.698m excluding the Pupil Premium for schools, but including Early Years Premium). However, in the light of lower than expected 3 & 4 year old participation, for the purposes of budget setting we have taken a prudent approach and estimated the Early Years Block as £210k lower than the provisional allocation.
5.10 Therefore the estimated total DSG is £199.488m, an increase of £2.730m on the comparable grant for 2015/16.
5.11 A surplus of £2.36m was carried forward from 2014/15 into 2015/16. Of this, £2.191m (including the commitment for ICT) was used to cover budget pressures in the current year, predominantly high needs, which could not be funded from the DSG. This left £169k available for any unexpected pressures during the year.