School funding in England. Current system and proposals for 'fairer school funding'

Status of this briefing

For up-to-date information on school funding reform, please see our linked briefing paper:

• Commons Library Briefing Paper 09801, School funding reform in England from 2018-19: Implementation of the national funding formula

The briefing below is not current will not be further updated, but is available as a historical account of policy development up to June 2017; it also provides detailed information on the current school funding system in England.

School funding reform – a planned national funding formula

The 2015 Government committed to introducing a national funding formula (NFF) to calculate the amount of core revenue funding that mainstream schools in England would attract. There isn't currently a national formula like this; funding levels are instead determined through a complex combination of national and local funding decisions.

What is the national funding formula (NFF) and how would it work?

This is the formula that the 2015 Government proposed would be used to calculate and distribute core revenue funding for mainstream schools in England.

The Government also proposed separate formulas to calculate early years funding and high need funding (largely this is for high-cost provision for children with SEND), as well as for some services still centrally provided by local authorities.

As well as money from the NFF, schools would also get income from other sources, including: the Pupil Premium which on 2015 Government plans would remain outside of the NFF; 16-19 funding if they have a sixth form; early years funding if they have nursery classes; voluntary contributions and fundraising, to varying degrees; and capital funding for maintenance, renovations and new places, where appropriate.

When would the formula be introduced?

The 2015 Government intended that the NFF would be introduced in a 'soft' format in 2018-19 and a 'hard' format from 2019-20.

It consulted on the weightings in the NFF and implementation just prior to the 2017 General Election. At the same time it ran a consultation on high need funding – largely, this is money to support the education of children and young people with special educational needs and disabilities.

The DfE's illustrative figures on impact of the proposed NFF and other funding reforms

Alongside the second stage NFF consultation, the DfE published illustrative figures showing how schools and local authorities might fare in two hypothetical scenarios under the proposals:

• If the NFF was implemented in full in 2016-17, without any transitional protections, with funding estimated using 2016-17 pupil data (2016/17 data for academies). The illustrative figure was then compared to a 2016-17 funding baseline. Figures were expressed in cash terms.
• If the NFF was implemented with transitional arrangements (maximum increase of 3% and maximum cut of 1.5% per pupil) as was planned, in the first year of transition, in 2018-19. Again, the figures are based on 2016-17 pupil data (2016/17 for academies). Results were then compared to 2016-17 baseline funding, and again, figures were expressed in cash terms.

These illustrative figures weren’t intended to show what any school would get in any particular year, and the DfE didn’t provided illustrations for future years beyond 2018-19. However, it did say that no school would see annual cuts in per-pupil funding of more than 1.5% in any one year and more than 3% overall (i.e. across more than one year) as a result of the NFF. Increases at individual schools were due to be capped at 3.0% per pupil in 2018-19 and 2.5% in 2019-20.

The Conservatives’ 2017 General Election Manifesto subsequently pledged that no school would have its budget cut as a result of the new formula; see section below for more on this, and on other parties’ school funding pledges.

If the NFF is implemented, actual allocations would depend on a range of variables including:

• Changes to pupil numbers and characteristics at individual schools;
• The overall school funding envelope;
• Any changes made to the formula post-consultation and post-General Election;
• What transitional arrangements and protections were adopted;
• In 2018-19, and if a 'soft' formula was introduced, the local funding formula the relevant local authority adopts.

Potential impact of the NFF

in its December 2016 consultation, the DfE said that as a result of its proposals:

• 54% of schools would be funded at a higher level than in 2016-17. 73% of these schools were due to gain up to 5.5% per pupil and would be likely to be on ‘full formula’ by 2019-2020.
• The remaining quarter of ‘gainers’ were due greater increases and consequently would take longer to attain their ‘target rates’.
• 46% of all schools would be funded at a lower level. For the majority of these schools, the reduction would be between 1- 3% per pupil.

Groups of schools the DfE said were more likely to gain were:

• Schools with low prior attainment.
• Schools with pupils who live in areas with above average levels of deprivation but who have not been heavily targeted through historic funding decisions.
• Schools in areas where funding levels have historically been low – but not every school in historically 'low funded' areas and not every 'low funded' area.
• Small rural schools.

The DfE said that the main group of schools likely to see reductions were:

Those in Inner London and some other urban areas that have particularly benefitted from historic funding decisions and where underlying levels of deprivation have fallen over recent years […] The main reason that this formula would reduce funding to schools in these areas is that we are using the most recent data about relative levels of socio-economic deprivation.

Cost pressures and the wider school funding context

On 14 December 2016, the National Audit Office (NAO) published a report on the financial sustainability of schools in England.

This said that mainstream schools, overall, would need to find £3 billion of efficiency savings by 2019-20. This equated to a net real-terms reduction in per-pupil funding of around 8% for mainstream schools between 2014-15 and 2019-20. The NAO reported that:

• The overall schools budget overall is protected in real terms between 2015-16 and 2019-20, but this does not provide for funding per pupil to increase in line with inflation.
• This is partly because pupil numbers will rise significantly over the same period, and partly because schools are facing cumulative cost pressures from things such as pay rises, increased pension and national insurance contributions, and inflation.

The 2015 Government accepted that schools were facing cost pressures, said it was helping them to make efficiencies. It also sought to differentiate between two issues - i.e., the overall level of school funding and how funding was distributed.

General Election 2017 manifesto commitments on school funding

School funding pledges included (but weren't limited to) the following:

• The Conservatives promised to significantly amend their funding formula plans so that no school would have its budget cut as a result of the new formula. The overall schools budget would increase by £4 billion by 2022. Universal infant free school meals would be withdrawn and replaced by free breakfasts for primary-aged children.
• Labour pledged to reverse school funding cuts to date and provide real-terms per-pupil increases for the duration of the Parliament. Free school meals would be extended to all primary-aged children.
• The Liberal Democrats promised a fairer ‘National Funding System’, with protection against losses for all schools. Funding per-pupil would be protected in real-terms.
• The Green Party would ensure that real-term spending per pupil increased and was protected.
• UKIP would fund all secondary schools according to a single formula.

This note relates to England only.