The government’s new national funding formula has shifted money away from schools in the poorest areas towards those in less deprived parts of the country, a new report from a public spending watchdog warns.

The National Audit Office (NAO) says that since the introduction of the formula for England there has been a “relative redistribution” of resources to schools in better-off areas.

In contrast, it says, almost 60 per cent of the most deprived fifth of schools have seen a real-terms reduction in government funding since 2017-18.

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Meg Hillier MP, chair of the Commons Public Accounts Committee,  claimed the shift in funding towards less deprived schools has undermined the government’s levelling up agenda.

While schools in poorer areas continue to receive more support than those in better-off parts of the country, the NAO says the gap is narrowing and it calls on the government to review whether the formula is leading to a fair allocation of resources.

School funding formula ‘unfair on the most disadvantaged’

The formula, first introduced in 2018-19, brought in minimum per-pupil funding levels, but because most schools with high levels of deprivation were already receiving above the minimum threshold they did not see any increase.

However, under the formula, more than one in three of the least deprived fifth of schools (37.1 per cent) did get a rise.

In all, in 2020-21 an additional £266 million was allocated to 3,150 schools - none in the poorest fifth.

The NAO sys that, since 2017-18, average per-pupil funding for the most deprived fifth of schools has fallen in real terms by 1.2 per cent to £5,177, while for the least deprived fifth it has risen by 2.9 per cent to £4,471.

Cities with high levels of deprivation, such as Nottingham and Birmingham, as well as most London boroughs, have seen cuts while local authorities with relatively low levels of deprivation in the South West, the East Midlands and the South East received increases of around 1 per cent.

In all, 58.3 per cent of the fifth most deprived schools suffered a real-terms per-pupil funding cut, including 83.6 per cent of those in inner London.

Gareth Davies, the head of the NAO, said: “The Department for Education has met its objective of making the way it allocates school funding more transparent and consistent. However, it is less clear whether it has met its objective of allocating funding fairly.

“There has been a shift in the balance of funding from more deprived to less deprived local areas. Although more deprived areas and schools continue to receive more per-pupil funding than those that are less deprived, the difference in funding has narrowed. The department must evaluate whether this funding model is matching resources to need.”

Ms Hiller said: “Directly contradicting the government’s levelling up agenda, under its new formula funding has decreased in real terms for many of the most deprived schools.”

The report also says that government funding per pupil has remained virtually unchanged since 2014.

The DfE’s total funding for mainstream schools increased from £36.2 billion in 2014-15 to £43.4 billion 2020-21.

However, the increase in pupil numbers meant real-terms funding per pupil rose by only 0.4 per cent. The Department plans to increase school funding in 2021-22 and 2022-23, so total and per-pupil funding are expected to rise in real terms by around 4 per cent.

Geoff Barton, general secretary of the Association of the School and College Leaders, said the problem was that the government has not provided enough money to schools when introducing the new formula.

“The introduction of a National Funding Formula for schools was the right thing to do because of a long-standing postcode lottery in the amount of funding they were allocated,” he said.

“However, the government’s failure to put sufficient money into the system overall has meant that the cake was never large enough in the first place.

“The result is that slicing it in a different way has created a new inequity with many schools in deprived areas losing out.

“These schools support children and young people who face the greatest degree of challenge in their lives and they desperately need this funding. The government has failed them.”