Baffled by a formula for change

While the political row over Tony Blair's choice of a grant-maintained school for his son hit the headlines, more profound questions about the funding of GM schools have remained obscure. But a new funding regime for GM schools, due to begin next April, is of great significance.

The Department for Education will announce next month the funding method for GM schools in 17 local education authorities (LEAs) - those where more than 30 per cent of secondary school pupils attend GM schools. The aim is to move away from relating the funding of GM schools to the spending decisions of its LEA, and towards basing it on the education element of a LEA's standard spending assessment (SSA, the assessment of what it needs to spend).

Under the new Common Funding Formula (CFF), an LEA's education SSA is distributed to a GM school using a national formula based on a variety of factors - namely, the latest pupil numbers, the number of free school meals, special educational needs and a particular school's fixed costs.

Transitional arrangements will ensure that this will not immediately lead to a drop in budgets for any GM school. The LEA can hold back a portion of the educational SSA for responsibilities relating to nursery provision, school transport that benefits GMpupils and for special needs support. An LEA is permitted to fund a locally managed school (LMS) at a lower level than a GM school.

The Chartered Institute of Public Finance and Accountancy (Cipfa) has expressed concern about these moves. It believes that this could be the first stage of "hypothecating" (earmarking) SSA, removing local authorities' powers to decide how to spend theirincome. Cipfa argues that this is contrary to ministers' expressed intentions, and will force authorities to cut back on other areas of spending.

"The Institute believes, along with many other organisations, that there is a need for a formula basis when distributing funds to GM schools," said Glenn Smith, financial policy development manager at Cipfa. "The present formula achieves that, but requi r es a certain amount of work, and produces oddities between LEAs."

Calderdale, one of the pilot authorities, has had to cut back on many services in order to bring educational spending up to its SSA. It is forced to fund GM secondary schools at SSA level, and if it fails to fund LMS schools similarly then they can be expected to opt out. If Calderdale fails to increase primary school spending in line with the secondary school allocation, then the authority's future years' educational SSA will be lower.

So this year Calderdale had to increase educational spending by 2.6 per cent at a time when its capping level increased by just 1.25 per cent. As a result, there have been significant cutbacks in leisure and social services, and next year there will needto be further cuts amounting to perhaps pounds 6m.

It could be argued that Calderdale has brought about its own problems by failing to spend to its educational SSA. But the Pennines authority claims it has no choice but to underspend on virtually all services compared with SSA, because it is allocated too little on its highways SSA to keep its roads open in winter.

Basing funding on SSAs will produce other bizarre results, says Cipfa. Schools will increasingly be "rewarded" for being in a deprived borough. A school in a well-heeled suburb of Manchester will be much better funded than its neighbouring school across the authority border in Stockport - although pupils may come from very similar social and economic backgrounds.

Robin Squire, the Schools Minister, dismisses these criticisms. Speaking at Cipfa's conference on the Common Funding Formula in October, he said that 95 per cent of headteachers involved in piloting the CFF said they would not return to the old system.

"The CFF has made clear for the first time what is spent on LEA continuing responsibilities, has brought into even sharper focus the split between spending on primary and secondary schools, and has given schools a clearer view than ever before of the basis of their funding."

Mr Squire did concede, though, that the new formula is very complex. "It is rumoured that only one civil servant in the DFE understands it," said David Jamieson MP, who sits on the Education Select Committee. He argued that witnesses to the committee, including GM heads and LEA directors of education and finance, found it virtually incomprehensible.

Mr Rob Higgins, headteacher of Charles Darwin secondary school in Bromley, one of the pilot CFF authorities, felt that despite its complexity, it was an improvement over the old system.

"It provided the basis for our development, and was at a level we thought was reasonable," he said. "The governing body shared the opinion that the Common Funding Formula attempted to give the budget more clarity, and a clearer basis for distribution. T h e DFE did their best to explain through meetings and roadshows how the funding formula worked, but it is a very complex mechanism. There is still some way to go to achieve total clarity."