Education Policy Institute publishes new report on Impact of the National Funding Formula for schools

All schools in England face real terms cuts in funding per pupil, even after the introduction of a new national funding formula

New analysis by the Education Policy Institute (EPI) also finds that half of primary and secondary schools face large real terms, per pupil, cuts in funding of between 6-11 per cent by 2019-20.

The Government consultation on the introduction of a new national funding formula for schools closes on the 22^nd March. To inform this important consultation, the Education Policy Institute has considered what the impact of the NFF will be, who the winners and losers are, and its analysis puts the NFF into the context of wider financial pressures on the schools system.

Key findings

There are clear disparities within the existing school funding system in England, meaning the Government is right to proceed with its plan to introduce a new national funding formula (NFF).

The Government’s proposals are unlikely to satisfy many local areas which have been relatively lower funded and have campaigned vocally for a new formula. The Government’s plans to allocate relatively more funding to disadvantaged and low attaining pupils mean those lower funded authorities are unlikely to see the increases that they have hoped for. However these decisions made by the Department for Education are rational for a government which wants to reduce the significant attainment gaps which limit social mobility.

Even though a greater share of funding is proposed to be allocated to disadvantaged pupils, EPI research finds that the overall impact of redistributing the schools budget results in shifting funding away from the most disadvantaged pupils towards what is considered the ‘just about managing’ group.

We find that:

• The most deprived primary and secondary schools (those with more than 30 per cent of pupils on free school meals) experience a small net gain of £5.6m, overall, but the most deprived secondary schools will actually see falls.

• Other primary and secondary schools (those with less than 30 per cent of pupils on free school meals) gain an additional £275m overall. Many of these schools have very low levels of disadvantage.

• Pupils who live in the least deprived areas (as measured by the Income Deprivation Affecting Children Index) experience the highest relative gains.
   
• Additional funding for low prior attainment means that the lowest performing schools in the country are set to gain £78.5m more, overall, than the top performing schools. This is particularly acute in London, where we find a net loss to the highest performing primary schools of around £16.6m overall.

We also consider the impact of inflationary pressures (highlighted by the National Audit Office) and the removal of the Education Services Grant, when assessing overall changes to school finances between 2016-17 and 2019-20.

We estimate that by 2019-20:

• There are unlikely to be any schools in England which will avoid a real terms cut in per pupil funding by 2019-20, even in areas benefiting from the new formula;

• Around half of primary schools and around half of secondary schools will be faced with significant real cuts in funding per pupil of between 6 and 11 per cent by 2019-20;

• This amounts to an average real terms loss of £74,000 per primary school and £291,000 per secondary school.

• This equates to the loss of almost 2 teachers in an average primary school and 6 teachers in an average secondary school.

Without additional funding beyond 2020, there is a risk of further budget losses for around 5,000 schools, including around 880 schools that would lose more than 10 per cent of their budget if the Government decides to remove the NFF transitional protections beyond 2020.

Natalie Perera, Executive Director of the Education Policy Institute and report co-author, commented:

“For too long school funding has been inconsistent across the country, with similar schools receiving different funding levels to teach similar pupils. The Government is right to propose a new and more rational funding arrangement for schools despite a challenging economic climate.

While the NFF is broadly welcome, our research highlights that the wider financial pressures on schools mean that all schools in England are set to experience real terms per pupil cuts in spending over the next 3 years, even after the new formula is introduced.

Our findings suggest this could mean an average primary school loses funding equivalent to 2 teachers, while the average secondary school loses the equivalent of 6 teachers.

The Government also needs to be clearer about its funding plans beyond 2019-2020, to give schools time to plan for further changes in funding. If the DfE fails to secure additional funding beyond 2019-20, then it can only continue to deliver the new funding formula for “under-funded” schools by making further, large, cuts to the budgets of over 5,000 schools”

David Laws, Executive Chairman of the Education Policy Institute, commented:

“A new funding formula is long overdue and given the clear and persistent attainment gap between the most disadvantaged pupils and the rest, the Department is right to pursue a formula which targets a significant proportion of funding to disadvantaged pupils and those who need more support.

As our analysis shows, however, the government may receive little credit from schools for these reforms – as even the schools benefiting from the new formula have their gains completely wiped out by other funding pressures.”