IFS: New funding formula could imply further cuts to per-pupil spending of 7% for around 1,000 schools after 2019–20

Moving to a single funding formula inevitably creates winners and losers, and this reform comes at a time when schools budgets overall are under pressure. It would have been preferable to have reformed the system in the 2000s when there was more money around. 

The government has thus proposed putting in place protections for schools up until 2019–20, which will ensure no school sees a fall in its budget of more than 3% in cash-terms between 2017–18 and 2019–20 (or a real-terms cut of about 6%). Because of these protections, and the fact that a number of schools are currently a long way from their implied formula allocations, only about 60% of schools will be on the main formula by 2019–20. Around 1,000, or 5%, of schools would still be more than 7% above the funding level dictated by the main formula, and could expect cuts of that magnitude at some point after 2020. 

These are among the findings from a briefing note by IFS researchers, published today and funded by the Nuffield Foundation, which explores the government proposals to replace 152 different local authority funding formulae with a single national formula. This reform comes at a time when schools are part way through making their first real-terms cuts to school spending since the mid-1990s. The planned real-terms cut of 6.5% in spending per pupil between 2015–16 and 2019–20 would be the largest cut in school spending per pupil over a 4 year period since at least the early 1980s and would return school spending per pupil to about the same real-terms level as it was in 2010–11. In looking at the effects of the NFF up to 2019–20, we complement findings from the recent report from the Education Policy Institute, and we also extend this to look at potential scenarios after 2019–20. 

As in the government proposals, all figures provided in this release are in cash-terms, unless otherwise stated. 

Key findings include:

• There are significant transitional protections up to 2019–20. No school should see a cash-terms cut of more than 3% over this period (or 6% in real-terms).  The government has also placed a cap on the gains schools can experience of 2.5% in 2018–19 and a further 3.0% in 2019–20. The net cost of these transitional arrangements is around £290 million in 2019­–20, which temporarily boosts spending per pupil by about 0.7% in cash-terms.  

• Only 60% of schools will be “on formula” in 2019–20. This is because of the transitional protections in place up to 2019–20 and because many schools are currently a long way from their formula allocations. However, this means that there would be a significant adjustment after 2019–20 to implement the NFF fully. Around 1,000 schools would still be more than 7% above the funding level dictated by the main formula. 

• The government has provided no guidance to schools about what will happen after 2019­–20. We model a number of potential scenarios. If the Minimum Funding Guarantee is kept at -1.5%, almost all of schools would reach their formula level of funding by 2029–30 if school funding per pupil were frozen in cash terms. If there is a real-terms freeze to overall spending, all schools get there by 2024–25 or by 2023–24 if there is 2% real-terms growth.

• Inner London schools face a cash-terms cut in per pupil funding of 2.5% between 2017-18 and 2019-20. This is the direct result of implementing an adjustment for differences in school costs that takes better account of differences in teacher salaries than did the old formula. However, without transitional protections the government has put in place until 2019–20, Inner London schools would have faced a cash-terms per pupil cuts of around 9%. How the Government intends to move these schools to the main formula level remains unclear. 

• The new formula implies a small shift in funding from schools with the highest levels of deprivation to those with more typical levels of deprivation. The formula also targets more funding at schools with lower prior attainment and at small primary schools and larger secondary schools. 

Luke Sibieta, an author of the report said:

“If fully rolled out across England, a national funding formula would ensure similar schools in different parts of the country receive a similar amount of funding. While this has been the ambition of successive governments, they have consistently shied away from the hard choices such a reform entails. The current government is to be applauded for making specific proposals and setting out the reasons for the choices it has made.” 

Chris Belfield, another author of the report said:

“Somewhat inevitably, this reform creates winner and losers, and it comes at a time of severe pressure on school budgets as we are currently in the tightest four year period for per-pupil spending in English schools since at least the early 1980s. The government has put in place transitional protections to help smooth the transition process up to 2019–20. However, there is significant uncertainty about what will happen after 2019–20. This is a big omission considering  only 60% of schools will be on the main formula in 2019–20. The formula could imply around 1,000 schools would face a further 7% cut to their budgets in the next parliament.”

ENDS.

Notes to Editors:

1.       ‘The short and long-run impact of the national funding formula for schools in England’ by Chris Belfield (IFS) and Luke Sibieta (IFS) will be published on the IFS website www.ifs.org.uk at 00.01 Wednesday 22 March 2017.  

2.       This research has been funded by the Nuffield Foundation. The Nuffield Foundation is an endowed charitable trust that aims to improve social well-being in the widest sense. It funds research and innovation in education and social policy and also works to build capacity in education, science and social science research. The Nuffield Foundation has funded this project, but the views expressed are those of the authors and not necessarily those of the Foundation. More information is available at www.nuffieldfoundation.org

3.       The government is currently consulting on its proposals for a national funding formula. This consultation closes on March 22 and can be found here (https://consult.education.gov.uk/funding-policy-unit/schools-national-funding-formula2/)