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1 Summary

1.1 Hampshire County Council is intending to passport in full the increase in the Schools Block FSS resulting in spending against the Schools Budget of £547.253m. The minimum 4% per pupil guarantee will be met for schools recognising 3.4% cost pressures with headroom of around £1m available for schools in financial difficulties, specifically addressing deprivation.

1.2 Having met these pressures, Hampshire County Council is applying for an increase of £2.4m in its central spending limit from £1.388m to £3.8m. This will give a total spending requirement for non delegated items of £34.63m in 2004/05.

1.3 The Schools Forum supported the application for this increase in the central spending limit unanimously at its meeting on 17 December 2003.

1.4 The need for the increase arises from the following pressures on the 2003/04 and 2004/05 budgets related to the needs of vulnerable children.

1.5 The County Council is, for a second year, an excellent authority as rated by the comprehensive performance assessment and its Education service received the top rating with three stars.

1.6 The County Council is intending to passport in full for 2004/05. The central pressures cannot be met by over-passporting because of the ongoing impact on Council Tax payers in Hampshire or on other County Council services.

1.7 The central pressures can be met within the headroom available in the passported sum after ensuring schools receive budget increases for 2004/05 arising from the minimum per pupil guarantee. Meeting the central pressures outlined here will still leave headroom estimated at £1.71m for schools' delegated budgets.

1.8 In 2003/04 the County Council over-passported to the Schools Block the sum of £2m which all went into schools' delegated budgets. Over-passporting means that the County Council spent £2m more on education than the minimum increase determined by the increase in the Schools Formula Spending Share (SFSS). The County Council took this step, despite the impact on Hampshire Council tax payers, in recognition of the potential impact on education in Hampshire as a result of the changes in education funding nationally and the redistribution of grant away from Hampshire. Thus, in setting its 2003/04 budget, Hampshire increased ISB by 9.7 % and central Schools Block expenditure by 7.1%.

2 Level of variation

2.1 The details of the estimated total deductions permitted from the Schools Budget if the national limit were to be adhered to by the County Council are set out in Appendix 1. This appendix also gives the higher total of deduction of £3.8m from the Schools Budget which the County Council wishes to have approval for.

3 Reasons for seeking a variation

3.1 The revised budget for the Education Service is forecasting a £1.2m overspend, which is made up as follows

Special Education Needs - statements in mainstream schools - £550,000

This is largely due to an increase in the number of hours of teaching and learning support assistant support featuring in statements.

Special Education Needs - out-county provision £527,000

This overspend is for two main areas: higher than expected inflation of independent school fees, on average 13% and higher than expected costs of new placements as well as a few more placements.

Education Other Than At School £240,000

The overspend on this budget reflects the increased number of permanent exclusions, the impact of full time education for excluded pupils and the impact of changes to the former pupil retention grant arrangements.

Other -£87,000

The main pressures here relate to:

o the County Council's corporate IT strategy which underlines the significant benefits of linking the whole organisation through IT2000, in particular in 2003/04 by connecting remote youth, EOTAS and early years services sites.

o The increasing numbers of new arrivals, up by 65%, placing demand on the Ethnic Minority Achievement Services.

o However, these pressures are offset by compensating reductions in spending in other support areas of the service

3.2 These pressures on SEN and EOTAS have ongoing budget effects for 2004/05 and reflect the spending pressures being felt nationally by all LEAs. The ongoing pressures on central spending are in the following key areas.

· SEN statements in mainstream schools arises from a higher number of low incidence statements as well as an increasing complexity of statements. Hampshire is already a high delegator of SEN to schools. This area has previously been discussed with schools as an area for further delegation and local control, but it has not been seen as an area where schools see a benefit from the local budget control. As such it is met outside ISB in agreement with schools.

· SEN inflation on independent sector provision is running at 13% in Hampshire and a recent survey of South East LEAs shows this is consistent across the region. The pressure is unavoidable in the short term as these placements are on-going and the children's needs have to continue to be met.

· SEN - additional placements - These result from tribunal decisions and net movements of pupils into Hampshire. Much of the pressure arises from only six additional placements accounting for £250,000.

· Exclusions have risen by around 30 from the budgeted position of 200 due to decisions by schools. The statutory requirement for full time education means that these decisions at schools level require significant additional central Schools Block expenditure.

4 Constraining future increases

4.1 The budget monitoring report to the Education Policy Review Committee and to the Schools Forum in October 2003 gave an appendix setting out the reasons behind the pressures and some of the work being done to control future central spending pressures. This is attached as Appendix 2.

4.2 At this stage the County Council is awaiting the outcome of the DfES study into SEN spending being carried out as part of the funding review. The interim findings recognised that the cost pressures LEAs are experiencing in the areas of SEN and exclusions are real and to some extent unavoidable in the short term. The longer term proposals are expected from the study outcome and the County Council is keen to look at these for further opportunities to control spending.

4.3 In the meantime the County Council has a reputation as a high delegator of SEN and has a history over recent years of sound budget management in this area. In 2003/04 a total of £39.3m was delegated to primary and secondary schools in Hampshire for SEN. Opportunities for in county special school provision are pursued whenever capital funding allows with a number of new special units being developed recently as well as the development of the new Osborne Special School and complete redevelopment of the Shepherds Down school. This is to ensure modern and flexible places are available as far as possible for children with SEN.

4.4 The County Council has also worked, with the support of the Schools Forum, to develop a Behaviour Support Service in seven area bases around the County to work principally with primary schools to support children and use early intervention to reduce exclusions and the need for provision for children with emotional and behavioural difficulties at secondary stage in the future. This is a long term investment.

4.5 Specific action to focus on the recent budget pressures, particularly out county placements include

Actions taken to reduce expenditure this year:

· prevented a number of out-county placements through the development of locally based integrated packages. The number of out county placements has fallen over recent years: 2002 - 239, 2003 - 228, now -225

· negotiated a number of shared out-county placements with Social Services (SSD), increasing the number of shared places to 59, from 50 in 2003

Actions taken to further control expenditure in the future:

· seconded two school based practitioners to:

· specifically work with parents on avoiding tribunals;

· return young people, at present placed out-county, to Hampshire County Council provision;

· work with other agencies to establish a greater number of locally based integrated packages.

· work with SSD in establishing home/school links, to enable young people to be supported more appropriately in the local community

· plans to establish a more reliable and responsive respite service in liaison with SSD, in some cases using Education Department land or existing facilities

· intensive work within the Regional Partnership to establish a more appropriate way of working with out-county schools

· extended the Parent Partnership Service.

5 Funding the central pressures

5.1 In 2003/04 the County Council over-passported to the Schools Block the sum of £2m which all went into schools' delegated budgets. Over-passporting means that the County Council spent £2m more on education than the minimum increase determined by the increase in the Schools Formula Spending Share (SFSS). The County Council took this step, despite the impact on Hampshire Council tax payers, in recognition of the potential impact on education in Hampshire as a result of the changes in education funding nationally and the redistribution of grant away from Hampshire. Thus in setting its 2003/04 budget Hampshire increased ISB by 9.7 % and central Schools Block expenditure by 7.1%.

5.2 In discussing the priorities for funding in 2003/04, the discussion with the Schools Forum in November 2002, included consideration of the potential pressures on central issues including SEN and EOTAS, as well as early years. In particular there was much discussion of EOTAS because of the impact of the ceased Pupil retention grant on schools and the EOTAS service. It was agreed that the budget should be set on the basis of the existing numbers of excluded pupils, but that any budget pressure resulting in increasing numbers of exclusions by schools would be a first call on the 2004/05 budget. The decision was taken to ensure that there was pressure on both the schools and the authority to continue to work to try and prevent further increases in the number of exclusions. The Schools Forum was also aware of the difficult issues on SEN including the high costs of individual placements and the high levels of inflation being seen in placements in the independent sector.

5.3 This pressure cannot be met in 2004/05 by further over-passporting because of the ongoing impact on Council Tax payers in Hampshire or on other County Council services. The County Council is mindful of the recent ministerial expectations of Council Tax increases in the low single figures.

6 Schools Forum involvement

6.1 The Schools Forum have been involved in the budget setting and monitoring process for 2003/04. In its recommendations on the 2003/04 budget and determining the priority use of the overpassported £2m the Schools Forum had regard to the potential impact on the 2004/05 budget of any subsequent pressures on other Schools Block areas including those for vulnerable children (SEN and excluded pupils).

6.2 At their meeting on 22 October 2003 they received the Education Policy Review Committee's budget monitoring report which highlighted the potential for a significant overspend in 2003/04 with ongoing effects for the 2004/05 budget.

6.3 At the 24 November 2003 meeting they received a report setting out the need for an application for an increase in central spending (Appendix 3). The report gave the full context of the application. They were asked to consider the request with their conference groups and give their response at the 17 December 2003 meeting when 2004/05 budget pressures and priorities would be considered in full. The minutes of the November meeting are attached as Appendix 4.

6.4 Schools Forum at its 17 December 2003 meeting received an update report (Appendix 5) confirming the need for the application and the level of increase required. Schools Forum voted unanimously to support the application recognising that there was no option but to meet these budget pressures for educating the most vulnerable pupils in Hampshire. It also recognised that the County Council would continue to work to control these central spending pressures. The minutes of this meeting are attached as Appendix 6. However it did express its concern at the inadequate overall level of funding within the passported Schools budget increase to meet all the pressures for schools and for Hampshire pupils.

List of Appendices

1. details of the estimated total deductions permitted from the Schools Budget, and the higher total of deduction of £3.8m from the Schools Budget which the County Council wishes to have approval for.

2. Education Policy Review Committee and Schools Forum appendix on SEN cost pressures

3. Schools Forum report on central spending limit 24 November 2003

4. Schools Forum minutes 24 November 2003

5. Schools Forum report 17 December 2003

6. Schools Forum minutes 17 December 2003