A report by the National Audit Office (NAO) has found that while government funding per pupil has remained virtually unchanged since 2014, a new national funding formula has contributed to a shift in the balance of funding from more deprived schools to less deprived schools.1
The Department for Education’s (the Department’s) total funding for mainstream schools2 increased from £36.2 billion in 2014-15 to £43.4 billion 2020-21. However, the increase in pupil numbers meant real-terms funding per pupil rose by only 0.4%. The Department plans to increase school funding in 2021-22 and 2022-23, so total and per-pupil funding is expected to rise in real terms by around 4%.
Between 2015-16 and 2019-20, cost pressures on mainstream schools were estimated by the Department to have exceeded funding increases by £2.2 billion, mainly because of rising staff costs. Teaching staff costs increased by an estimated £3.6 billion (17%) during this period because of rises in teachers’ pay costs and higher pension and national insurance costs. The cost of supporting an increased proportion of pupils with education, health and care plans also grew by around £650 million between 2015-16 and 2020-21. Overall, funding increases were projected to exceed cost pressures in 2020-21.
However, the Department did not take account of the potential impact of COVID-19 as part of its assessment of cost pressures. While the Department provided schools with funding during the early stages of the pandemic for exceptional costs, and later in 2020 to help schools cover costs arising from staff absences, several stakeholders told the NAO that this funding would be insufficient.3 The Department also provided funding for the extra costs of providing free school meals in early 2021, and plans to spend a further £3.1 billion between 2020-21 and 2024-25 to help pupils to catch up on learning lost during the pandemic.4
The Department implemented a new national funding formula in 2018-19, which means funding for schools is now allocated more transparently and consistently. It allocates three-quarters of school funding based on pupil numbers, and the remainder is based on factors relating to the characteristics of pupils and schools. Before 2018-19, local authorities received a per-pupil funding rate largely determined by the rate they had received in the previous year. The Department did not calculate funding at school level or explicitly base funding on need, which meant similar schools in different local authorities could receive quite different funding allocations.
As part of the national funding formula, the Department introduced a new minimum per-pupil funding arrangement. In 2020-21, the levels were set at £3,750 per primary pupil and £5,000 per secondary pupil. Under the minimum funding arrangement, 37% of the least deprived fifth of schools were allocated more funding in 2020-21. However, none of the most deprived fifth of schools were allocated an increase in funding as a result of this arrangement. This is because these schools were already receiving per-pupil funding above the new minimum requirement.
Under the national funding formula, more deprived local areas receive more per-pupil funding than less deprived areas as funding is linked to need, but the difference has decreased. The main reasons for the relative re-distribution of funding between local authorities were the introduction of minimum per-pupil funding levels and changes in relative need, such as the proportion of pupils eligible for free school meals.
Between 2017-18 and 2020-21, average per-pupil funding in the most deprived fifth of schools fell in real terms by 1.2%, while per-pupil funding in the least deprived fifth increased by 2.9%. In total, 58.3% of the most deprived fifth of schools saw a real-terms decrease in per-pupil funding.
The Department cannot ensure that that each school receives the funding calculated by the national funding formula or the intended minimum funding levels, since this is decided by local authorities and academy trusts.Local authorities can apply local funding formulae but must pass on minimum per-pupil funding to their maintained schools, while academy trusts do not have to do the same for academy schools. The government has said that it intends to move to a ‘hard’ national funding formula where schools’ budgets would be set directly by the Department based on the formula.
The NAO recommends that the Department evaluates the impact of the national funding formula and minimum funding levels over time. The Department should use this information to review whether it is meeting its objective of allocating funding fairly with resources matched to need, paying particular attention to the shift in the balance of funding away from more deprived schools to less deprived schools.