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Schools: Funding Reform

My Lords, with the leave of the House, I shall now repeat a Statement made by my right honourable friend the Secretary of State in another place: ““With your permission, Mr Speaker, I should like to make a Statement on our plans to reform school funding. As Members from across the House will know, the current systems for funding schools—both for their revenue and capital needs—are too complex and lack transparency, which is why I want to make the way we fund all schools fairer, simpler and more efficient. I want to turn to capital spending first. Capital investment is crucial to education reform but, at a time of economic difficulty, we need to ensure that we are getting the maximum value for every penny we spend and we must ensure that tight resources are targeted on those most in need. In order to ensure we could target money on those areas in absolutely greatest need, I had to take the difficult decision last year to stop a number of school rebuildings planned under the Building Schools for the Future programme. In areas where planning was most advanced, more than 600 projects will go ahead, but other projects were stopped, and I recognise the deep disappointment that that provoked in communities where hopes had been raised. But we had to ensure that money was spent efficiently, and the design of the old BSF scheme was not as efficient as it could have been. Specifically, it did not prioritise schools in the worst condition and it did not procure new buildings as cheaply as possible. In order to ensure we spent money properly, I asked Sebastian James of the Dixons Store Group to review the entire DfE approach to capital funding. His report makes compelling reading and I commend it to the House. He found that the whole capital system was bedevilled by a complex allocation process with multiple funding schemes, a lack of good-quality building condition data, inefficiency in building design, a lack of expertise when it came to improving new buildings, a failure to make procurement as efficient as possible, a lack of clarity on maintenance, and overly complex regulatory and planning requirements. I am grateful to Sebastian James for his exceptionally thorough work and I wish to accept the majority of his recommendations, subject to a thorough consultation process over coming months. Specifically, I have accepted the recommendation to conduct a full survey of the school estate. The last Government stopped collecting any data on school condition in 2005, which has made fair distribution of funding much harder. I have also accepted the review's recommendation significantly to revise the school premises regulations so that a single, clear set of regulations applies to all schools. I intend to consult fully on this in the autumn. In addition, I have accepted his recommendation to move towards greater standardisation of design. One of the aspects of the BSF programme that Mr James criticised was that each school was separately designed, costing unnecessary millions in consultancy fees and often resulting in buildings which were not fit for purpose. Greater standardisation will reduce costs, improve quality and limit the opportunity for error. However, I recognise that in the short term schools around the country are facing real and pressing problems. The most pressing problem is ensuring that every child has a school place. In some local areas, there are simply not enough school places to meet rising demand. Local authorities have told me that insufficient attention has been given to this issue in the past. That is why I have already doubled the sums available to meet this pressure, announcing £800 million of additional spending given directly to local authorities to meet the demand for school places. Today, thanks to efficiencies and savings we have identified, including in BSF projects, I can announce an additional £500 million to fund more new school places in those areas of greatest need. Funds will be allocated this financial year to the local authorities with the greatest demographic pressures so that they can provide enough places, especially at primary schools, in September 2012. Details of those allocations will be provided over the summer and finalised in the autumn. But that is not all. I am also aware that many of our existing school buildings across the country are in desperate need of repair. I am grateful to honourable Members from all parties who have shown me and my ministerial colleagues schools in their constituencies which need investment. The energy and skill with which so many colleagues have lobbied underlines how effectively so many honourable Members represent the most needy in their constituencies. We have already made available £1.4 billion this year to deal with maintenance problems. Overall, we are spending more on school buildings every year of this Parliament than the last Government spent in every year of their first two Parliaments. But I want to do more, which is why today I am launching a new privately financed school building programme to address the schools in the worst condition wherever they are in the country. This programme will be open to local authorities and schools that had been due funding via BSF but, critically, it will also be open to those which, despite real problems, had never been promised BSF funding. I believe strongly that those in genuine need should receive the funding they deserve, and no part of the country should be favoured over any other. Individual schools and local authorities will all be able to apply and I am launching the application process today. The scheme will be rigorously policed to ensure that we do not incur the excessive costs incurred by previous privately financed schemes. The programme should cover between 100 and 300 schools, with the first of these open in September 2014, and it is expected to be worth around £2 billion in up-front construction costs. Some of those local authority areas which had experienced the termination of their BSF projects asked for a judicial review of my department's decisions. In February, Mr Justice Holman found in favour of the department on the substantive matters in dispute. But he found against me on procedural grounds and asked me to look again at the decision in six local authorities. He stressed that the decision to restore all, some or none of the projects was a matter for me. Over the past few months, Ministers and officials have listened carefully to the case made by the six local authorities and I am grateful to them for the constructive way in which they have presented that case. I have today written to those authorities to let them know that I am minded to indemnify them for contractual liabilities resulting from the stage their projects had reached, but I am not minded to restore their specific BSF projects. They now have a further opportunity to make representations to me before I take a final decision. I appreciate that the local authorities and their representatives will be disappointed. But let me also be clear that this decision, if confirmed after any representations have been made, does not mean an end to new school buildings in their areas. Those local authorities will all be eligible for support from the new programmes I am establishing to cater for population growth in the areas most in need and the new programme to cover the worst dilapidation. That is central to my reasoning on why I am minded not to restore their projects. I want to ensure absolute fairness in the distribution of the resources at my disposal. Because the previous Government chose not to collect data on the condition of school buildings after 2005, I do not have the facts to judge how the needs of these schools compare with the needs of other schools around the country. The fairest thing that I believe I can do is to help to meet the costs which might arise from the stage these projects had reached and then to invite the affected schools to apply to the new school rebuilding programme, and be assessed on an equal footing with everyone else, on the basis of need. And, of course, should any of these local authorities have severe need pressures, they are likely to receive a portion of the £500 million fund that I have announced today. I would now like to turn to schools revenue funding. The current funding system is, of course, extremely complex, opaque and often unfair. Most colleagues will have lived with the inconsistencies for years now, as similar schools in different parts of the country received widely differing and inequitable levels of funding. The problems with the system that we inherited have recently been underlined by concerns expressed over academies funding. Under the system set up by the last Government, academies received money in lieu of services that would previously have been provided by their local authority. But local authorities continued to receive the same funding as if they were still providing these services. That meant that local authorities were being, relatively speaking, overfunded, for duties they no longer discharged. So, at the spending review we announced that, from now on, we would deduct money from local authorities to take account of the fact they no longer provided services to academies. The huge success of the academies programme, with 803 academies open and over 800 more in the pipeline, has meant we need to look at the issue again. A number of local authorities have asked us to reconsider the amount of money deducted. So today, I am publishing a consultation document for local authorities explaining the basis on which it is intended that this money will be deducted in this year and next. But this area is only one where the funding system we inherited is failing to meet the needs of the 21st century and much wider reform is needed. So today, we are also publishing a consultation proposing a fair and comprehensive reform of the way in which schools revenue funding is calculated overall. At present, similar schools in different areas can receive very different amounts of funding for their pupils. This is not fair on head teachers, on teachers or on pupils. That is why I am proposing a new fairer national funding formula, with appropriate room for local discretion, in order to have a simpler, fairer and transparent system. The problems with the current system run very deep, and we will not be able to solve them overnight. We want to consult to ensure everyone's views are heard on how much change schools can cope with. We will not introduce change until we are confident in the new approach and certainly not before 2013, and we will ensure that there are substantial transitional arrangements. But we are determined to start moving as soon as we can towards a system which ensures all children are given the right level of funding to meet their needs. Taken together with our investment in 100 new teaching schools announced last week, our investment of an additional £300 million in the early years and an extra £2.5 billion in the pupil premium, I believe that we can now begin to ensure that our schools are funded in a way which is modern, fair and just””.