School funding has been firmly back at the centre of political debate over the past few weeks, in part owing to the Department for Education’s plans to introduce a national funding formula from April next year, as well as the National Audit Office’s report on school funding pressures.

Last week, the Education Policy Institute (EPI) published new analysis looking at how the proposed funding formula would affect different schools. It also showed the likely overall impact by 2020, once the new formula, inflationary pressures and the ending of the Education Services Grant are all taken into account.

We intentionally addressed these issues separately in the report because they highlight two very different policy challenges.

Firstly, the principle of a national funding formula is right - similar schools with similar pupils should be funded similarly, irrespective of where those schools are located. But the redistribution of a fixed pot of money inevitably has implications for schools: some will win and some will lose.

Who those winners and losers should be and the extent of those gains and losses is, however, less clear-cut.

As we say in our report, “fairness” is subjective and there is a lack of robust evidence on how much it costs to run a school or educate a disadvantaged child. We, therefore, find ourselves relying either on value judgements or, as in the case of the proposed national funding formula, the wisdom of crowds.

This means there is not necessarily a right or wrong answer as to how funding should be redistributed; rather it’s a case of considering which types of children, areas and schools are given priority.

Secondly, there is the question of whether the overall pot of money is big enough in the first place.

‘Transparency in school funding’

On this question, the reality is that all schools are likely to face funding pressures over the next three or four years, equivalent to almost two teachers for the average primary school and around six teachers for the average secondary.

But we also know that this comes after almost two decades of increased investment and real-terms protection for schools. So, is there scope for schools to make savings of this scale? I’m not convinced there’s a reliable answer to this yet.

One thing I am convinced of is that the current school funding system needs to be transparent, consistent and comparable and that a national funding formula will help to achieve this. But it won’t happen if there is widespread opposition to either the shape of the formula or the size of the pot.

Ministers are now faced with a difficult decision and a series of imperfect options.

They could stick to the proposed formula, even though it has created political unrest among backbenchers, who expected more money to be redistributed from London into rural areas.

Under this scenario, ministers could avoid losing a vote in Parliament by abandoning plans to remove the role of local authorities from funding decisions. This avoids the need for legislation but it somewhat blurs the clarity of a national funding formula and would also be unpopular with academies.

Ministers could alternatively revisit the weightings in the national funding formula, to shift more money from disadvantaged pupils into the general pot, thereby moving money away from London and urban areas and into rural shires.

This would placate some backbenchers, but leave the government in the uncomfortable position of having taken money from the most disadvantaged children. This would also inhibit the government’s stated intention of improving social mobility.

Or ministers could implement a short-term fix by abandoning the national funding formula and instead using the additional £400 million allocated for schools in 2018-19 and 2019-20 to provide an uplift to the lowest-funded local areas (similar to the Coalition government’s approach in 2015).

Our analysis suggests that this could bring the 40 lowest-funded authorities up to around £4,267 per pupil but it would then prevent a further 63 areas from seeing gains which they otherwise would under the full formula.

This might be the most politically palatable option, but with the government having come further than any other in introducing a new national funding formula, it would be a real shame to ditch those plans now.

Natalie Perera is executive director and head of research at the Education Policy Institute

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