The Department for Education does not know if the funding it has provided to schools will be enough to cover the extra Covid costs they have faced, an influential public spending watchdog warns in a new report.

The National Audit Office is calling on the government to systematically assess the impact of the Covid-19 pandemic on schools’ finances.

It says the department should consider how the pandemic has affected schools’ costs and income over time and also the differential impact on schools in contrasting circumstances.

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The report says: “The Department is providing extra funding of £3.3 billion between 2020-21 and 2024-25 to help schools cover costs relating to Covid-19, mostly for catch-up learning, but does not know the extent to which this covers cost pressures.”

The department told the NAO that a 16 per cent rise in average revenue surpluses in academy trusts in 2019-20 “provided assurance that overall, in the early stages of the pandemic, schools did not incur unmanageable extra costs that they could not cover through savings elsewhere.”

However, the NAO report says: “The stakeholders we consulted consider, based on work by the Education Policy Institute [think tank] and their own research, that the funding provided by the department was insufficient to cover the additional costs arising from the pandemic.”

The NAO report also says that:

• Overall school funding levels per pupil have remained virtually static since 2014-15. The NAO says that although the department’s total funding for schools increased by 7.1 per cent in real terms between 2014-15 and 2020-21, the growth in pupil numbers meant real-terms funding per pupil rose by just 0.4 per cent. Total core revenue funding for mainstream schools rose from £36.2 billion in 2014-15 to £43.4 billion in 2020-21.
• The DfE cannot ensure that that each school receives the funding calculated by the national funding formula or the intended minimum funding levels, since this is decided by local authorities and academy trusts.
• The government has said that it intends to move to a “hard” national funding formula where schools’ budgets would be set directly by the DfE based on the formul,a but this would need legislation.

School funding: DfE must assess Covid impact on school finances

The spending watchdog is now calling on the government to address some of the issues identified in its report.

It calls on the department to: 

• Assess systematically the impact of the Covid -19 pandemic on schools’ finances and take account of this information in its decision-making, considering the potential impact of the pandemic on schools’ costs and income over time, and the differential impact on schools in different circumstances.
• Evaluate the impact of the national funding formula and minimum funding levels over time and use that information to inform whether further action is needed to meet its objectives.
• Focus its review on whether the shift in the balance of funding from more deprived areas to less deprived areas, and from more deprived schools to less deprived schools, means it is adequately meeting its objective of matching resources to need.
• Make clear, in communicating information about funding to the school system, Parliament and the public, that local flexibilities mean that it cannot guarantee the amount of schools’ block funding that each school receives.
• In particular, the department “should be explicit that it does not have assurance that academy schools are receiving the minimum per-pupil funding levels that it has set.”
• Take action to help mainstream schools deal with high-needs cost pressures. The NAO says the department needs to complete its review of support for pupils with special educational needs and disabilities (SEND) and set out how it will improve this aspect of the funding arrangements for mainstream schools.

Paul Whiteman, general secretary of school leaders’ union the NAHT, said: “This new report from the NAO shows that despite all the spin from government, school funding has effectively remained static since 2014-15. The truth is that, even if these were normal times, schools are still funded inadequately.

“Right now schools face ever-increasing cost pressures as they implement new government policies. And as the NAO rightly identifies, the government has utterly failed to take account of the impact of new cost pressures created by Covid-19.

“The government’s current funding plans are simply insufficient, and the stark reality is that many schools are likely to be forced to make continued cuts at a time when we should be investing heavily in children’s education.”

Kevin Courtney, joint general secretary of the NEU, said: “This important report exposes the financial difficulties schools continue to face, even after the start of the government’s much-heralded funding increase for schools. 

“The report also concludes that the Department for Education has ‘not systematically assessed the cost pressures arising from Covid-19’ and that their assurances that schools didn’t have unmanageable costs arising from Covid ran counter to the experience of the stakeholders the NAO spoke to. ” 

The DfE has insisted that the formula is levelling up school funding and “delivering resources where they are needed most”.

A spokesperson said: “It ensures that the areas with high proportions of students from disadvantaged backgrounds are receiving the highest levels of funding, providing £6.4 billion in funding for pupils with additional needs in 2021-22.”

The spokesperson added that the government is providing the biggest uplift to school funding in a decade, with an additional £14 billion over the three years.