The government does not have a fixed target date for having its national funding formula for schools fully in place, it revealed today.

The Department for Education says in a new consultation, published this morning, that local authorities will continue to have some “flexibility” over school funding allocations until further notice.

But ministers hope to move local formulae “progressively closer” to the national funding formula (NFF) from 2023-24, to achieve what the government describes as “greater fairness and consistency” for schools.

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The formula is aimed at distributing money to schools according to a single set of principles, bypassing local authorities.

But when the new NFF was launched in 2018-19, the DfE decided it would first introduce a “soft” formula only, giving councils flexibility over how individual budgets were set.

The DfE proposals for school funding changes

This approach has since been extended on a number of occasions, most recently to 2021-22 in light of the disruption caused by the Covid crisis.

Now, in today’s consultation on “fair school funding for all”, the DfE says that no adjustments will be made to these arrangements until 2023-24, when it aims to “begin to tighten those rules, so that schools’ allocations through local formulae move closer to the NFF distribution”.

However, the DfE has made it clear that it does not plan to set a “fixed target date by which the hard NFF will be fully in place”.

Once the changes have been implemented in 2023-24, the government said it will pause to “take stock” of the impact, before taking the “next step” towards “funding schools more directly”.

So what does this all mean for schools? Here are the key points to consider from the consultation.

1. No changes for two more years

The government has said it will not be changing the rules on local authorities’ flexibility over school funding in either 2021-22 or 2022-23.

This means councils can continue to use “different factors in their local formulae to reflect additional needs in schools’ allocations” for the time being.

2. Tighter rules on the horizon

In two years’ time, the government is proposing to “tighten” the rules on local formulae, so that allocations “move closer to the NFF distribution”.

This would involve requiring each council to bring each of its local formula factors “at least 10 per cent closer to the NFF factor value”, compared with 2022-23.

The DfE said it would also set requirements, such that local authorities “could not ‘overshoot’ the NFF value”.

Its ambition would then be to “build momentum towards a hard NFF through gradually increasing the pace at which local formulae are tightened in subsequent years”.

“After an initial 10 per cent movement closer to the NFF in 2023-24, and subject to the impact of this movement, we aim to move at least 15 per cent closer to the NFF in 2024-25 and at least 20 per cent closer in 2025-26,” the department said.

3. Questions over future of local decision making

The DfE consultation asks whether local authorities should still have a role in the way funding is allocated through their own local formulae.

The NFF provides money to schools on the basis of a basic per-pupil entitlement, which accounts for 75 per cent of the funds but also includes funding for factors based on pupils’ additional needs and the characteristics of the school.

The DfE consultation says that currently some local authorities use different factors in their local formulae to decide on additional needs in schools’ allocations.

It wants to move to a system where a directly applied NFF would “include all pupil-led and school-led funding factors”, with cash allocated to schools “on the basis of the hard formula, without further local adjustment through local formulae”.

But the DfE acknowledges that there is a “critical question” over whether “there would continue to be merit in local control of certain aspects of mainstream school funding” - and is seeking views on this matter.

4. Aligning schools’ and academies’ funding 

The DfE is using the consultation to set out an “open question” on the “potential value” of introducing a “consistent funding year” across maintained schools and academies.

“Currently maintained schools are funded on a financial year basis and academies on an academic year basis, and we are keen to understand the appetite for a change in funding year for maintained schools to an academic year basis, as part of the shift to a hard formula,” the department says.

It adds: “We are aware that moving maintained schools to being funded on an academic year basis would have the potential to cause some complications with accounting and financial reporting.

“This is because the financial reporting cycle would differ from the funding cycle, with the financial reporting cycle remaining on a financial year basis in line with the reporting cycles of other funding streams local authorities work with.”

5. Making funding fair for SEND

The DfE also argues in the consultation that “it is crucial that the system for funding mainstream schools, and the move to a hard NFF, supports effective special educational needs and disabilities (SEND) provision”.

It claims that moving to a hard NFF will ensure that funds to support children with SEND are “distributed consistently between schools across the country”.

“Currently the amount of funding allocated by additional needs factors varies significantly between local formulae”, the department says. 

“For example, the amount of funding that a secondary pupil with low prior attainment attracts varies from £450 to just over £3,800 across local formulae.

“These inconsistencies between local formulae mean that schools with similar numbers of pupils with additional needs can receive significantly different levels of funding in their core allocations simply by virtue of the LA the school happens to be in.

“Even where two local authorities direct the same proportion of their overall schools’ budgets towards additional needs, different choices of which additional needs factors they use, and the weightings that they give to those factors, mean that similar schools are funded differently.

“A hard formula can deliver a level playing field, in which all schools receive funding on a consistent basis through the NFF to meet the needs of pupils with SEND.”

It adds: “We will consult further on this crucial element of the overall funding system for schools in more detail following the publication of the SEND Review outcomes.”

The consultation will be open for responses until Thursday 30 September.

Heads warn more school funding is needed

Geoff Barton, general secretary of the Association of School and College Leaders, said: “While we support the direction of travel, our bigger concern is that there is not enough money being put into the system in the first place. The cake is too small, no matter how it is sliced.

“We recognise that the government is currently investing more money in schools but we do not think this is enough to repair the damage done by years of underfunding and we are concerned that much of the new money will be simply eaten up by rising costs.

“This is even more critical because of the havoc wreaked by the pandemic and the pressing need for significant investment in education recovery.”

He added: “On the detail of this consultation, the government has rightly addressed the postcode lottery which has existed in the funding system for many years with the introduction of a national funding formula.

“However, local authorities can still adjust allocations to schools and this means that similar schools can receive different funding depending on where they are in the country. This next move could remove local authority flexibilities and make allocations more consistent.

“There is a massive risk of creating winners and losers and the government is right to set out in this consultation a cautious and phased approach to this adjustment. However, as long as the overall amount of funding continues to be inadequate, schools will remain short of the money needed to educate children.”

Schools minister Nick Gibb said: “Parents and families deserve to know that the extra money we are putting into the education system is benefitting their children, wherever they live.

“We are delivering the biggest increase in school funding in a decade, with total additional funding of over £14 billion over three years - but it is important the money is distributed fairly.

“We’ve already taken significant steps by removing the postcode lottery of the previous funding system but now it is time to go further and make the system simpler and more transparent - and ensure every school is treated fairly, wherever it is in the country.”