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Levelling up? Deprived schools suffering under National Funding Formula reform

Inclusion School funding and finance Government policy
The National Funding Formula (NFF) reforms have led to a real-terms fall in funding for the most deprived schools, while the least deprived are better off.

Average per-pupil funding fell in real terms by 1.2 per cent for the most deprived fifth of schools but increased by 2.9 per cent for the least deprived fifth thanks to the Department for Education’s (DfE) reforms.

The Association of School and College Leaders (ASCL) says that a report last week from the House of Commons’ Committee of Public Accounts (CPA, 2021) “lays bare the reality behind the government’s ‘levelling-up’ rhetoric”.

And this all comes after changes to the way Pupil Premium funding is calculated have wiped off £90m from this crucial funding stream – this has mainly hit primary schools.

The NFF reforms were introduced in 2018/19 in a bid to iron-out historical unfairness in the system that saw similar schools receiving very different levels of per-pupil funding simply because of where they were located.

As well as more closely matching funding to pupils’ and schools’ characteristics, the new formula introduced a minimum level of per-pupil funding and is more transparent in its methodology.

However, MPs on the CPA found that the new NFF has nonetheless led to a “rebalancing of funding away from more deprived schools towards less deprived schools”. The new minimum per-pupil funding levels have benefited the least deprived schools most.

Between 2017/18 and 2020/21, the CPA finds that per-pupil funding reached £5,177 on average for the most deprived fifth of schools (a real terms fall of 1.2 per cent). Funding for the least deprived fifth of schools, meanwhile, has reached £4,471 (a 2.9 per cent increase).

The report adds: “The DfE told us that it had always known that the minimum funding levels were likely to benefit the least deprived schools. This was because the national funding formula was weighted towards disadvantage, so the schools with the lowest per-pupil funding were highly likely to be the least deprived schools.”

The CPA’s report is damning: “In making changes to the school funding system, the DfE has failed to take enough account of the impact of its decisions on individual schools and their pupils. The adverse impacts have fallen disproportionately on deprived local areas and schools.”

Geoff Barton, general secretary of ASCL, said: “This report lays bare the reality behind the government’s ‘levelling-up’ rhetoric. The introduction of a national funding formula is the right approach, but the way in which the formula is being implemented means that those schools with the most need of more money – those serving our most deprived communities – have lost out. And we know, of course, that the children and young people in these schools have also suffered disproportionately from the impact of the pandemic.”

The DfE is now consulting over a move to a so-called “hard” funding formula under which it would set schools’ budgets directly (DfE, 2021). Currently local authorities and academy trusts still have discretion to vary allocations calculated via the NFF, although the DfE says that 73 local authorities are already mirroring the NFF “almost exactly”.

Despite this reassurance, the CPA is asking the DfE to publish an assessment of the likely impact of these proposals on different types of school.

The report came shortly before the government's Spending Review, which confirmed plans to invest an extra £4.7bn into the core schools’ budget by 2024/25. This is “over and above” the 2019 settlement for schools, which covered the period until 2022/23. In his address to the House of Commons, on Wednesday (October 27) chancellor Rishi Sunak claimed this funding would “restore per-pupil funding to 2010 levels in real-terms”. There was also an additional £1.8bn for Covid-19 education recovery, bringing the government’s total spending for education recovery to £4.9bn. See our full report here.

Elsewhere, the CPA found that it is impossible to tell if individual academy schools are receiving the government’s guaranteed minimum per-pupil funding levels.

In January 2020, the prime minister guaranteed that every school would receive minimum funding of £3,750 per primary pupil and £5,000 per secondary pupil in 2020/21.

Local authorities are legally required to ensure that maintained schools get this money, but multi-academy trusts are allowed to pool funding centrally.

When the CPA challenged the DfE on how parents could know whether individual academy schools are getting the minimum levels of funding, it signposted to the schools financial benchmarking website. However, as this combines funding from a range of sources it is not possible to identify the schools block per-pupil funding that each academy receives.

As such, the CPA is asking the DfE to begin publishing annual details of the schools’ block per-pupil funding that each academy should get.

The report also finds that schools are having to cross-subsidise their sixth forms with funding intended for younger pupils. The DfE admitted to the committee that between 2014 and 2021 it prioritised five to 16 funding, resulting in an 11.4 per cent real-terms fall in funding for sixth-form students. However, the DfE also told MPs that it has increased funding for students aged 16 to 19 in the past two years, in order to start redressing the balance.

The report also slammed the DfE for the on-going delays in the publication of its review into SEND provision. It has been two years since the review began its root and branch look at how to improve SEND provision across the system, but publication has been delayed three times.

The DfE told the committee that it had extended the timetable in order to “take full account of the changes caused by the pandemic” and could not commit to a revised publication date. The report adds: “It is therefore still not clear how the DfE plans to improve the SEND system and make it more sustainable, and when practical changes will be made.

It adds: “While the DfE drags its feet, more and more children with SEND are progressing through the school system without the support they need.”

Dame Meg Hillier MP, chair of the CPA, said: “Schools are facing a perfect storm of challenges with promises of teacher pay rises, per-pupil funding changes and falling rolls but no clear plan from the DfE.

“Schools and pupils in deprived areas are being hit hardest by the funding formula at a time when the government’s commitment is to level up. Add to this the on-going delays in the review of support for pupils with SEND and some of the most vulnerable children are facing an uncertain future – on top of the impact of Covid.

“The impact of the exam chaos, funding uncertainties and repeatedly delayed decisions is hitting young people hard and risks scarring their life chances.”