The National Funding Formula for schools explained

What is the National Funding Formula?
New plans to change how school budgets are allocated could see some schools gain, but others suffer. We explain the National Funding Formula in a guide for parents.
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In December 2016, the Department for Education (DfE) announced plans for a new National Funding Formula for schools in England.

In its consultation document, the DfE explained that a new approach to how money is allocated to schools is necessary because the current system is ‘unfair, untransparent and out of date.’ For example, in some areas, schools receive funding of over £7,000 per pupil, per year, while in others, they get just over £4,000. The current system is based on assessments and statistics from over 10 years ago, hence the need to reassess how budgets are shared between schools.

Some schools stand to benefit from the National Funding Formula, but others could end up with less money to spend.

What is the National Funding Formula?

The National Funding Formula is the method that the Government is proposing to use to decide how much money should be given to English state schools each year. Schools in Wales, Scotland and Northern Ireland won't be affected.

It aims to remove discrepancies in funding that have arisen from budgets being allocated by local authorities, rather than central Government, and ensure that all school budgets are set using the same criteria. The DfE believes that this will direct resources where they are most needed.

There are also plans to help schools manage their budgets better.

The National Funding Formula is set out by the Government but will be administered by local authorities, which will have some flexibility in setting funding for schools in their area. All local authorities will have to follow the formula by 2021, but most are in the process of moving across to the formula already.

How will schools be funded under the National Funding Formula?

Under the proposed National Funding Formula, there are a number of different factors – clumped together in four ‘building blocks’ – that will be taken into account when setting schools budgets.

Block A: per-pupil funding

This is the biggest factor that will be used to allocate funding to schools, set by the local authority. Every primary school will be awarded at least £3,500 per pupil per year, regardless of their location, the size of the school, or any other factors. 

Secondary schools will receive at least £4,800 per pupil.

There will also be a Minimum Funding Guarantee, which means that schools are guaranteed a certain amount of per-pupil funding each year. The majority of local authorities have stated that schools in their area are guaranteed at least the same amount of per-pupil funding year on year, but a significant minority have allowed for a reduction in funding of up to -1.5%.

Block B: additional needs funding

This block of money will be allocated on the basis of five additional needs:

  • Deprivation.
  • Looked-after children (optional).
  • Prior attainment: additional funding based on the number of children who are assessed as not achieving a good level of development in the Early Years Foundation Stage Profile.
  • English as an additional language.
  • Mobility (optional, for schools that have high numbers of pupils leaving and joining throughout the year).

The aim is to provide extra funding for schools in deprived areas or that have a large number of pupils from a disadvantaged background, to help raise the attainment of children who statistically perform less well than their peers.

Block C: schools block funding

This is money allocated to schools independently of any factors relating to pupils. It includes: 

  • Lump sum: a fixed and equal amount given to every single school in the area by their local authority. The majority of primary schools will receive £110,000.
  • Sparsity: extra money for small or isolated schools that can’t save money by sharing services or facilities with other schools. Most local authorities are choosing not to allocate a sparsity sum; of those that do, the average payment for primary schools is £20,000 to £30,000.
  • Premises: money allocated on the basis of rates and other factors like split sites.
  • Growth: extra funding for schools that are expecting significant increases in pupil numbers.
  • Falling rolls: allocated to schools that have seen a reduction in numbers, to help them prepare for an expected future 'bulge' in pupil intake.

Local authorities will have to specify how much of the schools block funding schools should allocate to their special educational needs (SEN) budgets. Most schools will have to ringfence 7.5% to 12.5% of their schools block funding for SEN provision.

Block D: geographic funding

This will be a ‘weighting’ based on the school’s location, and recognises factors such as the difference in teachers’ salaries depending on region. For example, there will be a London and London Fringe weighting.

Will schools be better or worse off under the National Funding Formula?

Under the new proposals, some schools will benefit from bigger budgets, while others will see their funding cut. Initial estimates suggest that 10,740 schools will gain, but 9,128 will lose out.

For example, most local authorities are setting a ‘lump sum’ payment of around £110,000 per school. Currently, the equivalent amount awarded to schools by their local authority varies from £59,000 to £175,000.

The schools that are likely to benefit the most from the National Funding Formula are:

  • Schools where pupils have low prior attainment
  • Schools where pupils live in areas with higher than average levels of deprivation
  • Schools in areas where local authority funding is currently low
  • Small rural schools.

Geographically, the DfE believes that schools in Knowsley, Barnsley, Derby and socially deprived inner city areas in Manchester, Liverpool and Birmingham will be the biggest gainers.

However, schools in Inner London and some other urban areas like Luton and Coventry are likely to see their budgets cut, mainly because while these areas have historically been seen as deprived, and so attracted more money, deprivation has fallen in recent years and the gap between the ‘haves’ and ‘have nots’ has narrowed. 

What do the experts say?

Predictably, opinion is split over whether the National Funding Formula is a good thing for schools. Announcing the plans, Education Secretary Justine Greening said, ‘Our proposed reforms will mean an end to historical unfairness and underfunding for certain schools. We need a system that funds schools according to the needs of their pupils rather than their postcode, levelling the playing field and giving parents the confidence that every child will have an equal opportunity to reach their full potential.’

But speaking to The Guardian, Adrian Prandle of the Association of Teachers and Lecturers said, ‘School budgets are already cut to the bone. Without additional funding, schools will struggle to recruit enough staff, many will have to cut staff, cut the subjects they teach, cut IT upgrades, increase class sizes, cut the maintenance of classrooms, cut extracurricular activities and charge parents for school concerts and plays.’

The Grammar School Heads Association has warned that grammar schools will be some of the hardest hit, and may have to ask parents for financial contributions.

What about pupil premium?

Pupil premium is a sum of money awarded to schools for each child who qualifies for free school meals on the basis of their family income, specifically to improve prospects for these pupils, for example by funding one-to-one or small-group support, extracurricular activities, school trips, and so on. Pupil premium is protected until 2020, but may eventually be merged into the National Funding Formula.