MATs and the National Funding Formula : a marathon not a sprint

On 14th September details of the long awaited and much talked about national funding formula for schools and high needs were published.

We no longer have NFF proposals but rather a final NFF – it wouldn’t have seemed out of place if Justine Greening’s announcement had been pre-empted with a finale style drum roll. The introduction of a NFF is a very welcome step, and one which previous administrations have been unable to see through.

Completing a suite of reforms

It is important that we acknowledge that the September announcement completes a suite of funding reforms that mean all aspects of the dedicated schools grant (DSG) - the core funding for early years, schools, high needs and central services - will be distributed according to national formulae. It means that the distribution process is transparent and that over time budgets will be predictable, less reliant on historical spending patterns and more responsive to demographic change. What reform to the distribution formula cannot do is address the adequacy of the total funding available. Our DfE colleagues will always be subject to the limitations bestowed upon them by HMT in terms of how much cash is made available for education.

This is a negotiation that will rumble on throughout the next spending review and beyond. In the shorter term the DfE have had to make do with shuffling the existing budget to release an extra £1.3bn into the core schools and high needs budget over the next two years. In brief, the injection of this additional money means that schools can gain up to 3% per pupil for the next two years, without others having to experience cash reductions.

If the principles of transparency and predictability are genuinely going to be observed however, we need to know that that the additional £1.3bn investment will be included permanently in the DSG from 2020 onwards. What is still rather worrying is that even with this additional investment the Institute for Fiscal Studies (IFS) has calculated that by 2020 schools will still have to find savings to offset 4.6% real terms cuts.

The four building blocks of the NFF

The introduction of a minimum level of per pupil funding is a sensible response to a real concern that funding for additional needs has been subsidising core provision. However, we need to examine whether the levels announced by the Secretary of State are sufficient. If they are not some schools won’t be able to deliver the quality of education they want to provide and which pupils need. Everyone agrees that pupils who have additional needs should be able to access all of the support that their individual characteristics indicate is necessary to meet their needs.

Fundamentally the national formula for schools consists of four building blocks:

1. Basic per pupil funding according to key stage
2. Additional needs funding
3. School-based funding, including a fixed lump sum amount of £110,000 that will be allocated to every school
4. Geographical costs, which take account of differences in the costs of living for staff around the country.

If the funding per pupil in blocks one and two, plus the lump sum and any money for small rural schools (known as sparsity funding), doesn’t provide the agreed minimum per pupil sum, budgets will be topped up. For primary schools the minimum per pupil level will be £3500 by 2019/20 and for secondary schools with key stage four the level will be £4800 by 2019/20.

Funding for the Pupil Premium grant will continue to sit ‘outside’ the national formula so that all schools will receive a fixed amount of funding for any of the pupils who have been eligible for free school meals at any point in the last six years, or who are currently receiving free meals.

A period of transition

As with any change process it is right that there is a period of transition. The government remain committed to implementing a ‘hard’ formula whereby schools will receive their annual funding allocation according to the national formula, but for at least the next two years (the soft formula years) local authorities will continue to have some control over exactly what gets into the school bank account. Undoubtedly this is a double edged sword.

So what are the implications for MAT leaders?

CFOs don’t put the crystal ball away just yet, remember this is about a journey with several alternative routes.

Local formulae will still determine the funding that the trust receives. How close this is to NFF will only be determined once all relevant local formulae have been consulted and agreed on by the local schools forum. This will take place throughout the autumn.

Amidst the challenge to mirror the national formula, local authorities will have increased flexibility to set a minimum funding guarantee and opportunity to transfer 0.5% of the schools block money into another block – high needs for example? The central schools services block (CSSB), created to cover the costs of local authority retained duties (previously covered by the now extinct education services grant) could mean less available for ongoing functions. In 2018/19 a local authority could see a cut of up to 2.5% against current year expenditure baselines.

MATs will, of course, have the opportunity to redefine how they allocate funds across the chain. This will be the challenge. It seems sensible that the NFF calculation will be the yardstick for these financial planning decisions, if not the final outcome? MATs will naturally want to explore the ‘flexibility within a structure’ options that their autonomy and economies of scale give them. In many ways this gives them a headstart, but chances are there will be obstacles along the way.

Find out more about the impact of the NFF at individual school level.

Julia Harnden
ASCL Funding Specialist

The Association of School and College Leaders (ASCL) is a professional body and trade union, representing over 18,000 school and system leaders across the UK. Our members include CEOs and executive heads of multi-academy trusts, as well as heads, deputies, assistant heads and business managers in primary schools, secondary schools and FE colleges. Find out more about ASCL.

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