The national funding formula for schools and high needs

1. The national funding formula for schools and high needs [NAME], Funding Policy Unit [DATE]

2. Background • Since 2010, we have been reforming the funding system so that it is simpler, fairer and more transparent. • In spring 2016, we consulted on the principles that should underpin the funding system and the factors that the new formulae should contain. • We then held extensive consultation – launched in December 2016 – on the details of the formulae and illustrated its potential impact. • We received over 26,000 responses to our consultations and these have all been considered fully.

3. What’s been announced? • In July 2017, we confirmed that we would introduce national funding formulae for the 2018-19 allocations of schools and high needs funding to local authorities. • At the same time we announced that introduction of the formula would be supported by additional investment of £1.3 billion across 2018-19 and 2019-20. • We confirmed that the additional funding would be distributed in a way that would enable all schools and local areas to benefit. • We have now set out our full response to the consultation and the details of the final national funding formulae.

4. What’s been published? • Executive summary • Policy document – this sets out the details of the structure of the reformed funding system and our final national funding formulae for schools, high needs and central schools services. • Government responses to the consultations – these set out the full response to the second stage consultation (held between December 2016 and March 2017), on the schools and high needs funding formulae • Allocation tables* – these show the impact of the national funding formulae over the next two years, including provision allocations for 2018-19 • Equalities impact assessment – updated to reflect the final formula. • Technical notes – these explain the details of the formula calculation • Collect tables- these show LAs the calculation of their provisional LA level NFF allocations and the illustrative NFF allocations for schools in their area .

5. The structure of the funding system • From 2018-19, we are confirming the following: • The dedicated schools grant for LAs will be allocated in 4 blocks (schools, high needs, early years and central schools services). Each will be calculated on the basis of a different national formula. • The vast majority (99.5%) of the schools block will be ring-fenced and must be distributed through the local formula for schools. With agreement from their schools forum, LAs can move 0.5% into other blocks e.g. high needs. • It remains our long-term intention that schools’ budgets should be set on the basis of a single, national formula (a ‘hard’ formula). To ensure some transitional stability, LAs will continue to set a local formula for schools in 2018-19 and 2019-20.

6. The schools national funding formula (1) • The schools NFF will comprise 14 factors – the minimum per pupil level is an additional factor to the 13 included in our original proposals A Basic perpupil funding Age-weighted pupil unit Minimum per pupil level B Additional needs funding English as an additional language Low prior attainment Deprivation Mobility School-led funding C Premises Lump sum Sparsity Growth Split sites Exceptional premises Rates PFI Area Cost Adjustment D Geographic funding NB: Not to scale. Funding for factors in italics will be allocated to local authorities on the basis of historic spend in 2018-19

7. The schools national funding formula (2) • The formula we proposed in December has been improved in 3 main ways: • We have increased the basic per-pupil amount so that primary schools, key stage 3 and key stage 4 pupils will attract £2,747, £3,863 and £4,386 respectively; • We are introducing an additional factor in the formula which will provide a minimum per-pupil funding level over the next two years. For secondary schools this will be £4,800 in 2019-20 with a transitional amount of £4,600 in 2018-19; and for primary schools this will be £3,500 in 2019-20 with a transitional amount of £3,300 in 2018-19. • We have increased the funding floor so that the formula will provide for an increase of at least 0.5% per pupil in 2018-19 and at least 1% per pupil by 2019-20 in respect of all schools compared to their baselines.

8. The schools national funding formula (3) • The following slides set out further detail on the 14 factors used in the formula. With the exception of the changes set out above, and a small change to the IDACI banding, the final factor values are as we proposed in the second stage consultation. • Basic per-pupil funding (£24.2bn, 72.9%) • Age Weighted Pupil Units - this is the basic funding that all pupils attract (£2,747 for primary; £3,863 for KS3; £4,386 for KS4). • Minimum per-pupil funding levels- for secondary schools this will be £4,800 in 2019-20 with a transitional amount of £4,600 in 2018-19; and for primary schools this will be £3,500 in 2019-20 with a transitional amount of £3,300 in 2018-19.

9. The schools national funding formula (4) • Additional needs funding (£5.9bn, 17.8%) • Deprivation funding– deprivation factors include eligibility for free school meals (both current and historic), and postcode-based deprivation (IDACI). • Low Prior Attainment– pupils who do not achieve the expected level on entry to primary school/at key stage 2 will attract additional funding through this factor. • English as an additional language– a pupil who speaks English as an additional language will attract funding if they have entered the state education system during the last three years. • Mobility funding- in 2018-19 we will allocate funding to local authorities on a historic spend basis.

10. The schools national funding formula (5) • School-led funding (£3.1bn, 9.3%) • Lump sum-every school will attract a lump sum of £110,000 through the formula. • Sparsity-eligibility for sparsity funding depends on the distance the pupils in the school would have to travel to their next nearest school and the average number of pupils per year group. • Premises- premises-related funding will be allocated through four factor: rates, split-sites, private finance initiative (PFI) and exceptional circumstances. Premises related funding will be allocated on the basis of historic spend. PFI will be updrated annually in line with RPIX. • Growth- in 2018-19 the growth factor will be allocated on the basis of what each local authority plans to spend, in total, on growth in 2017-18. • Area cost adjustment- we will apply a hybrid area cost adjustment which takes into account the general labour market trends and the particular salary variations in the teaching workforce. This is applied to basic per-pupil, additional needs and school led funding.

11. The schools national funding formula (6) • In addition to the factors set out above, the formula includes a funding floor and a gains cap. • The funding floor • The formula will provide for an increase of at least 0.5% per pupil in 2018-19 and at least 1% per pupil by 2019-20 in respect of all schools compared to their baselines. • The baseline used to calculate the funding floor includes basic per-pupil funding, additional needs funding and the difference between the school's historic lump sum/sparsity funding and the NFF lump sum/sparsity funding*. • The gains cap • The gains cap will be 3% per pupil in 2018-19 and a further 3% per pupil in 2019-20, over 2017-18 baselines. • We have also introduced a small adjustment to the gains cap to limit gains to the greater of 3% of a school’s baseline or 20% of their remaining formula cash gains. This is to ensure that schools with very low pupil-led baselines are not disadvantaged by the gains cap. *For new and growing schools we calculate an ‘if full’ baseline- the funding the school would have received in 2017-18 as if they were full- and use this to apply the funding floor.

12. The central school services formula (1) • The central school services block (CSSB) has been created from the DSG funding that is held centrally by the local authority for central services. This includes the funding which was previously delivered through the retained duties element of the ESG. • The central school services formula distributes 90% of funding according to a per-pupil factor and 10% of funding according to a deprivation factor. Both elements are adjusted for area costs. The central school services block will also provide funding for historic commitments. • A protection will be in place in 2018-19 and 2019-20 that limits reductions to 2.5% per-pupil a year. The level of gains will be set annually and will depend on the precise composition of the central school services block in each year. In 2018-19, gains of up to 2.5% per pupil will be allowed.

13. High needs national funding formula (1) • The high needs NFF comprises the 10 factors and adjustments that were set out in our original proposals

14. High needs national funding formula (2) • This is how each local authority’s high needs allocation is calculated. We then add gains of up to 3% per head of population for those local authorities due to receive more than their 2017-18 baseline through the formula See step-by-step calculation of each LA’s provisional allocation

15. High needs national funding formula (3) • The formula we proposed in December 2016 has been improved in 3 main ways : • We are increasing the funding floor from 0% to 0.5% in 2018-19 and 1% in 2019-20. The funding floor will be calculated using adjusted 2017-18 spending baselines derived from the information provided by LAs • We are calculating both the funding floor and the gains on a per head of (2-18) population basis, to ensure that the appropriate elements of the formula are all able to reflect demographic increases. The funding floor also has a cash floor to protect LAs with falling populations • For those elements of the formula which are intended to reflect more precisely the movement of pupils and students (the basic entitlement factor and import/export adjustments), we are making later updates to the provisional allocations. Apart from these we are able to give LAs earlier notification of their actual high needs funding allocations than previously

16. High needs national funding formula (4) • These are the final values and weightings for the factors and adjustments in the high needs funding formula. These are as we proposed in the consultation, but we have updated the baseline for the historic spend factor • Basic entitlement factor • = £4,000 per special school • and special post-16 institution • pupil/student • Import/export adjustments • = £6,000 per high needs • pupil/student (net • adjustment) • Historic spend factor • = cash sum equivalent to • 50% of 2017-18 spend baseline

17. DSG block movements • In July we confirmed the local budget flexibility arrangements associated with the schools block ring fence • Schools forums can agree that up to 0.5% of their schools block can be transferred out (e.g. to LAs’ high needs budget) • The operational guide specifies what information schools forums should take into account, including the outcome of consulting all schools • The department will consider applications from any LA that finds it absolutely essential to seek an exception to the 0.5% and schools forum agreement rules • We have provided support to LAs to help in their management of their high needs budgets, including • £23m high needs strategic planning fund paid in January 2017 • Benchmarking tools published in March, due to be updated in October 2017