School funding - House of Commons - 29 April 2003

Speech delivered on Tue 29th Apr 2003

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10.14 am

Mr. David Rendel (Newbury): I begin by congratulating the hon. Member for Wycombe (Mr. Goodman) on securing this debate on the first Tuesday after the Easter Adjournment and on his extraordinary prescience in choosing school funding as his subject in advance of the clamour that has arisen about the subject following the Easter conferences of the teachers' trade unions. As we seem to have rather more time towards the end of the debate than I expected, may I add that school funding is not provided entirely by the Government—

Andrew Selous : Does the hon. Gentleman agree that he has more time than he anticipated because of the complete absence of Labour Back Benchers wishing to participate in this debate?

Mr. Rendel : I forbore to say why Labour Back Benchers may not be present in the Chamber today, but it is reasonable to suppose that many of them have local elections in their constituencies and may believe that their duties lie in their constituencies today.

Mr. Francois : Like London.

Mr. Rendel : I am sure that many London Members wanted to be present and I see one or two here.

An interesting aspect of school funding that has not been mentioned is that it does not all come from the Government. Some funding comes from parents who choose to pay for their children's schooling and it may be worth mentioning to those who may not have seen it that an interesting article about independent schools in The Independent, which may have appeared in other newspapers, points out that around one in five failed their Ofsted inspections this year and a number of them are, worryingly, said to take on teachers without putting them through the usual tests with the Criminal Records Bureau that all state schools now insist on. It might be sensible for the matter to be brought to the attention of parents who send their children to such schools. I would be very worried if any child of mine went to such a school.

This debate has arisen just before the Secretary of State is expected to make a major statement on the subject of school funding. That statement is expected on Friday, the day after the local elections. It is not particularly cynical to suspect that his statement may be embarrassing for the Government. Let us hope that he is, at least, honest enough to admit that the shortfall in school funding is due to Government miscalculation of the real costs faced by schools this year and not because local authorities have squandered or squirrelled away all his money.

Mr. Randall : I also read that the statement will be made on Friday, but, as the hon. Gentleman is probably aware, the House will not be sitting on Friday. Presumably the information will be given not to the House but to a newspaper in Norwich or some such place.

Mr. Rendel : The hon. Gentleman makes a good point. His party has more opportunities for Opposition day

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debates than my party and he might like to consider whether that would provide a suitable opportunity to bring to the House some of the subjects he would like to discuss following the Secretary of State's statement on Friday.

When the Chancellor announced the comprehensive spending review in July, he talked about the biggest sustained rise in education spending in a generation. There is no question but that more money is going into education, but past experience has taught us not to take at face value everything that this Government claim in their spending plans. I remember that £19 billion of the first comprehensive spending review turned out not to exist. It was the product of double and treble accounting. The last Budget settlement is also a product of smoke and mirrors, hence the mismatch between ministerial rhetoric and reality, about which many hon. Members have already spoken, when schools are facing a tough Budget settlement. The outcome is that head teachers are having to consider employing fewer teachers and support staff while local authorities are being forced to choose between service cuts and increased council tax.

When the Government talk about a 6 per cent. plus increase in funding for education, they are ignoring two key factors. First, the increase is not evenly spread. Changes to the distribution formula for local government funding have created many losers as well as some winners. Councils allocated an increase in the Government's floor of 3.2 per cent. are particularly vulnerable. Secondly, the statement does not take into account the extra costs being loaded on to schools, including the increases in national insurance contributions, teachers' pay and employers' pension contributions.

Mr. Goodman : Is the hon. Gentleman aware of what the Select Committee on Housing, Planning and Local Government, which is surely dominated by Government Members, has said of the funding formula? Hon. Members will be interested to know that it said: "The result is that many of the new formulae do not appear to be evidence-based and can be criticised for being insufficiently robust and more open to judgment than was previously the case."

Mr. Rendel : There are still big problems with the funding formula. There have been problems for many years now in trying to arrange a fair funding formula for local government, perhaps for education in particular. I therefore take the hon. Gentleman's point that there may still be a need to try to get funding more in line with the needs of local authorities across the country.

According to the Local Government Association, the 2003-04 settlement does not take account of additional pressures on schools amounting to more than £1.2 billion. Once those are taken into account, only £282 million of the new money is left. The transfer of some standards fund categories to core budgets is being used to mask what amounts to a cut in schools' real funding. Some £538 million has been put into the core budget to cover the cost of transferred standards funds, but last year those grants amounted to £694 million. That is a shortfall of £156 million. The Secondary Heads Association, therefore, is right to argue: "The first principle of moving from Standards Fund categories to core budgets has to be that the same amount of money (increased for inflation) must find its way into school budgets."

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That has not happened this year.

Last year, some 15 per cent. of schools without sixth forms and 19 per cent. of schools with sixth forms had deficit budgets. The new pressures come at a time when schools are being asked to implement the time and work load agreement. As last week's statement from the National Union of Teachers made clear—little though the Secretary of State may like to hear what the NUT has to say—that is now in jeopardy.

Ministers say that local councils are to blame for failing to pass on all the money allocated to school budgets. The reality is very different. No less than 130 of the 148 local authorities are passporting the full increase to schools for 2003-04, even when the increase in school funding exceeds the increase in their overall grant.

On authorities where the increase in school funding exceeds that in the overall grant from the Government, it is worth mentioning in passing that such an increase can come about not only in authorities that have suffered a poor settlement this year but, interestingly, in those where the grant allocated by the new formula is comparatively generous—perhaps more so than that allocated by the old formula. Under the Government's new formula, such councils have hit their ceiling and are not, therefore, being granted the amount that even that formula says that they should receive. In my local authority, the total grant that should have been given under the new formula has been cut back by the ceiling. Therefore, the total extra grant provided this year is less, over the whole of the authority's expenditure, than the amount that should normally have been passported through to education alone. That has led to particular difficulties in funding all the other services.

Mr. Francois : I thank the hon. Gentleman for his courtesy in giving way yet again. Just in case the Minister believes that we are crying wolf today, may I press the point that one of the reasons why we are so concerned is because we realise that this is not a one-off but the beginning of a process, which is likely to run for years and years? From our perspective, it looks like it will only get worse. That is why it is important to protest now while we perhaps have the chance to persuade the Government to change their mind.

Mr. Rendel : I sympathise with the hon. Gentleman's point. As far as those authorities that have hit a ceiling are concerned, I hope that they will find that it is less effective next year and that they will get a better settlement. I am sure that he is right on those settlements that have been cut back by the new formula.

Interestingly, local councils plan to spend an extra £100 million this year on top of the passported amount, which shows that there is still a gross mismatch between central Government allocations and assessments of local need. The Government admitted that mismatch when they allocated an extra £28 million to 36 local education authorities. They said: "We recognise that in some authorities the combination of a low increase in Education Formula Spending coupled with reductions in grant through the Standards Fund may result in lower than expected budgets for schools."

The Minister may recognise those words because he used them in a Department for Education and Skills press notice released on 26 March 2003. His expression

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suggests that he does not recognise those words—perhaps he has forgotten including them in his press release, but I can assure him that he did.

It is the old story of the Government retaining their grip on the purse strings while local councils are asked to accept accountability without responsibility. In other words, there is a fundamental lack of transparency. A key aspect of the transparency problem is that the funding system for education remains extremely complex and difficult to understand, which is something that other hon. Members have pointed out this morning. Even taking into account the measure of rationalisation that the Government have sought to introduce, the Secondary Heads Association says that there are still at least 66 varieties of funding available to secondary schools.

Some schools have budget deficits of up to £1 million, while others are sitting on more than £2 million—where is the transparency in that system? Where, indeed, is the fairness when money allocated for spending on today's children is being set aside by schools for a sports hall, which will be built five years down the line. Liberal Democrat research has shown that schools with the lowest numbers of pupils on free school meals are most likely to record a surplus, and there is a serious question about whether funds are reaching the schools that need them most.

Who exactly is accountable for that? Is it the Chancellor of the Exchequer, who sets the budget? Is it the Secretary of State for Education and Skills, who has responsibility for how that money is spent? Is it the Deputy Prime Minister, whose Department allocates schools money to local authorities? Is it the local authorities, which distribute the money to schools and have the option of topping it up via council tax increases? That confusion, which is built into the system, results in a confusion of accountability. May I repeat the request of my hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) for an audit of all local authorities, which should publicly declare any money that they may be holding back?

Liberal Democrats want to see education until the age of 14 funded by local authorities through local taxation with top-ups from general taxation to ensure equity. Under our scheme, local councils would be able to vary the amount paid into local schools and colleges. Our party would also support an individual pupil needs formula, whereby those from disadvantaged backgrounds would carry additional funding to the schools that they attend. The bottom line is the need for a fairer, more transparent, more accountable system, which should cater for the needs of local schools and individual pupils.

This year's settlement raises questions that go well beyond whether there is enough money in the system. More fundamentally, it poses the question whether the Government are serious about working together with schools to boost standards for all, or whether they prefer to play a game of fantasy figures in a desperate bid to avoid responsibility.

10.29 am