Mr David Paterson
Wallop Primary School
School Lane
Nether Wallop
Stockbridge
Hampshire
SO20 8EH

18 December 2003

Your Ref: RP/TW/Novl4jb03

TARGETED TRANSITIONAL GRANT 2004-05

Thank you for your letter of 5 December, on behalf of the Hampshire Schools' Forum, about the use of the targeted transitional grant in 2004-05.

As you will know, Ministers' main concern in relation to school funding for 2004-05 has been to provide greater stability and certainty for all schools, to enable them to plan ahead effectively. The package of measures that the Secretary of State has announced for 2004-05 - including a minimum funding guarantee for all schools, a reversal in planned cuts in the Standards Fund and a minimum increase in the Schools Formula Spending Share of 5% per pupil - should ensure that most schools have sufficient funds to cover cost pressures arising in 2004-05. However, many authorities have expressed concern that some schools will face residual difficulties as a result of decisions taken this year - including in particular those who have incurred deficits or have run down reserves to an extent which is unsustainable.

The purpose of the transitional grant to is put authorities in a position where they can work with schools to deal with these residual difficulties and to get them back on course to balanced budgets by 2006-07 at the latest. In order to achieve this Ministers believe that it is essential that the grant is targeted at the specific schools which are facing the most difficulties balancing their budgets, rather than distributed across all schools in an authority. We understand that this will involve LEAs making difficult decisions but believe that it is right that they should do so, in consultation with their Schools Forums, in order to help all schools reach a sustainable level of expenditure without risking damage to children's education.

Of course you are right that any additional funding which is provided from the transitional support grant must be accompanied by a convincing recovery plan in which the LEA has confidence and to which it will hold the school. Indeed, the agreement of such recovery plans will be a condition of payment of grant to the LEA, and LEAs are required to make compliance with the plan a condition of grant to the school, As you say, this is a one-off grant for 2004-05 and 2005-06 only and we would expect schools to make adjustments to their spending patterns to bring their budgets into balance by the end of that period: our guidance does make that clear and we would certainly welcome any reinforcement of that message by the authority and Schools Forum. On the question of the content of recovery plans, we do not plan to be prescriptive about this: it is clearly right that the authority should be able to attach whatever conditions it considers appropriate to each school's situation in that school's particular context. This could certainly include, as you suggest, a requirement to participate in (and pay for) appropriate financial management training.

Finally, you asked about the availability of further grant in 2005-06. As the Secretary of State's 29 October announcement made clear, there will be around £60m of targeted grant available nationally in 2005-06. The guidance issued under cover of my letter of 19 November sets out the principles which will determine the allocation of that grant between authorities in 2005-06. as that guidance explains, we cannot be more specific at this stage since the outcome for individual authorities will depend on the details of their overall settlement for that year. However, it is reasonable to assume that, on the whole, authorities which are receiving substantial transitional funding in 2004-05 are likely to receive some further funding in 2005-06, since one of our aims will be to ensure a reasonable funding trajectory to 2006-07.

We look forward to receiving Hampshire's Transitional Support Plan by 31 December. If you have any queries in the meantime, please contact Jacquie Spatcher on 020 7925 6216.