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Evidence to Education Committee Inquiry on School and College Funding

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This note was submitted as evidence to the Education Committee Inquiry on School and College Funding.

1. Overall levels of school funding

As shown in Figure 1, funding per pupil has risen by around 2% per year in real terms for secondary schools and 2.4% per year for primary schools since the mid-1970s (https://www.ifs.org.uk/publications/8236). However, growth has not been constant over time. Funding per pupil grew gradually over the 1980s, before stagnating and falling over the mid-1990s. During the 2000s there was then very substantial growth in funding per pupil, with funding per pupil growing by an average of 5% per year in real terms in the decade between 1999–00 and 2009–10. Under the coalition, funding per pupil was largely constant in real terms per pupil as the addition of the pupil premium compensated, on average, for real-terms cuts in core funding.

However, between 2015–16 and 2017–18, funding per pupil fell by just over 4% in real terms. This probably under-states the effect on real resources, as schools also faced additional costs as a result of employer pension contributions, national insurance and the apprenticeship levy (https://www.ifs.org.uk/publications/8027). Up until July 2017, school funding per pupil was due to fall further in real terms between 2017–18 and 2019–20. However, the Department for Education allocated an additional £900m to school funding in 2019–20 from other budgets (the much-quoted headline figure of £1.3 billion is the combination of the additional in both 2018–19 and 2019–20). As a result, school funding per pupil is now expected to be frozen in real terms between 2017–18 and 2019–20, albeit at a level about 4% below its recent high-point in 2015–16 and about the same level as in 2011–12. 

Figure 1 – Primary and secondary school spending per pupil, 1978–79 to 2019–20 (2017-18 prices) 

Sources: Updated figures from Belfield and Sibieta (2016), https://www.ifs.org.uk/publications/8236

However, these national figures mask significant differences in the changes in funding experienced by different types of schools. In particular, the most disadvantaged schools enjoyed much larger increases in funding per pupil over the 2000s than their less-disadvantaged counterparts (https://www.ifs.org.uk/publications/8236). In the late 1990s, the 20% of secondary schools with the most deprived pupils only received around 10% more funding per pupil than the least deprived quintile. By 2013–14, this difference had risen to 30%; in primary schools, the funding differential rose from 10% to 25% over the same period. The introduction and expansion of pupil premium continued this trend, but did not start it.

Empirical evidence supports the use of targeted extra funding for deprived schools to reduce the attainment gap between rich and poor students (https://works.bepress.com/c_kirabo_jackson/28/). The effect is even larger if it is preceded by high-quality early years provision.

However, what matters for pupils and their attainment is not the level of funding, but how this translates into actual resources for their education. We have shown that disadvantaged schools used much of the increase in funding per pupil they received over the 2000s to hire additional teaching assistants or non-teaching staff (https://www.ifs.org.uk/uploads/publications/wps/WP201510.pdf). Unfortunately, most of the existing evidence suggests that teaching assistants have generally not been used in ways that maximise their impact on educational attainment (http://maximisingtas.co.uk/research/the-diss-project.php). Going forward, better information on how best to use TAs in the classroom, such as the Education Endowment Foundation’s campaign to maximise the impact of teaching assistants, could help promote a tighter link between additional funding and benefits for students.

2. Implementation of a national funding formula

Before the 2017 general election, the government set out ambitious plans for a national funding formula for schools in England. This would replace all 152 different local authority funding formulae with one single national funding formula applying to all state-funded schools. The intention was to eradicate the differences in funding levels between apparently similar schools and, in doing so, remove the role of local authorities in allocating school funding. Since then, the government has set out new proposals that are more limited in their effect, but still welcome.

The most important change is that the national funding formula will no longer be fully implemented until at least 2020–21. There will be a school-level formula, but it will only be used to calculate how much each local authority receives based on all the state-funded schools in its area. LAs will then be free to allocate funding (subject to certain regulations) to the schools in their area according to their own funding formulae.

The current system also differs from the originally proposed national funding formula in the minimum funding levels and funding protections it offers. For example, the new provisions guarantee that no school can attract a less than 0.5% cash-terms increase per year. However, none of these changes will affect schools directly. They will affect the amount that each local authority receives, but it is the local authority (in discussion with schools themselves through ‘School Forums’) who will decide how much funding each school actually receives. The minimum funding levels for primary and secondary schools are not obligatory and local authorities are able to reduce individual schools’ funding per pupil by up to 1.5% in cash-terms if they wish. The difference between this protection offered to individual schools and the 0.5% minimum increase promised in the main formula gives local authorities flexibility to respond to schools’ changing circumstances. For example, if a school’s pupil intake is becoming less deprived, its funding can go down and the money can instead be given to other schools whose pupil intake is increasingly disadvantaged.

Changes to the school funding process will inevitably create winners and losers, as some schools benefit from the new system while other schools lose out relative to the average. Introducing a major funding reform at a time when school budgets are squeezed was always going to be difficult. The latest proposals imply school funding reform is moving in the right direction, albeit it at a slower pace than implied by policy prior to the general election. This will get closer to a system where similar areas receive similar levels of funding. However, the proposals will not ensure that similar schools are funded in a similar way, as local authorities will still be free to implement their own funding formulae.

3. College Funding Levels

Further work by IFS researchers has centred on public funding for colleges and sixth forms. Figure 2 shows the level of funding per student in further education (ages 16-18) and school sixth forms over time.

Funding per student in further education is due to be about the same in real terms in 2019–20 as it was thirty years earlier in 1990–91 (https://www.ifs.org.uk/publications/9281). Given the growth in the size of the economy and public spending, this is remarkable. The FE sector has seen both larger cuts than schools at times of overall public spending cuts (1990s and 2010s) and slower growth when overall spending is growing. As a result, funding per student in further education is due to be about 13% lower than funding per pupil aged 11-16 in secondary schools in 2017–18; it was over 50% higher in 1990. The additional £420 million (2017-18 prices) of funding for the introductions of T-levels by 2021-22 will increase 16-18 funding per pupil by around £400 per student (2017-18 prices) in further education, but this will still leave funding 14% below its peak in 2010-11 if all other funding remains frozen in cash-terms per student.

Figure 2 – Further education and school sixth form spending per pupil, 1990–91 to 2019–20 (2017-18 prices) 

Notes and Sources. See Belfield, Crawford and Sibieta (2017). https://www.ifs.org.uk/publications/8937

Historically, school sixth form funding per student was generally higher than in further education; however, over the course of the 2010s, this position reversed. This is likely to be a direct result of the introduction of the national funding formula for 16-19 education. Amongst other factors, this formula provides a general uplift for more costly and larger programmes (generally vocational ones) that are more likely to be taught at further education colleges. 

As part of ongoing work, IFS researchers are doing further detailed analysis of further education funding, which is due to be published in September 2018.