Contact: Sarah Pook, (01962) 84 7045; [email protected]

1 Introduction

1.1 The new arrangements for school funding from 2006/07 were set out by the Minister of State for Schools on 21 July 2005. These arrangements include

· the implementation of the ring fenced Dedicated Schools Grant (DSG)

· multi year, rather than three year, budgets for schools linking in with the changes to the Spending Review timetable

· DSG baseline for 2005/06 to be the total of the Schools Budget for 2005/06, rather than Schools Formula Spending Share (SFSS)

· DSG for 2006/07 and 2007/08 to increase nationally by 6% over the baseline, with every authority getting at least 5% per pupil

· the continuation of the minimum funding guarantee (MFG) for schools

· an increased role for Schools Forums, accompanied by new regulations.

1.2 In addition there are proposals for the future of the Standards Fund and the Schools Standards Grant. It was further stated that the proposal for academic year budgets and funding has been dropped for the years 2006/07 and 2007/08.

1.3 At the same time the DfES has launched a further consultation about the formula to be used to distribute DSG to authorities. The closing date for this consultation is 30 September 2005 and a draft response is attached for consideration.

1.4 In August the DfES also announced the details of the additional funding to improve the quality of school meals. This is transitional funding, for three years from 2005/06 totalling £220m for local authorities and schools, after which the additional funding ceases and the DfES expects funding to be on a sustainable footing.

1.5 This report deals with each these issues in turn:

· new arrangements for school funding

· consultation or distribution of the dedicated schools grant

· funding for school meals.

1 New School Funding arrangements

1.1 The Government has confirmed that most schools funding will come in the form of a ring fenced grant from the DfES to local authorities, to be known as the Dedicated Schools Grant (DSG). This will cover the same service provision as the existing SFSS.

1.2 The total DSG for 2006/07 and 2007/08 will increase by 6% per annum over Schools Budgets in 2005/06. This increase broadly matches the increase in Education FSS in Spending Review 2004 of 6.8% in 2006/07 and 6% in 2007/08. This is because an increase of 6% on Schools Budgets produces a total for DSG equivalent to a 6.8% increase on Schools FSS for 2005/06. Every authority will have a per pupil increase of at least 5% for 2006/07 and 2007/08, details will be announced with the settlement in the autumn.

1.3 The MFG will continue for schools for the two years, with an announcement in the autumn setting the guarantee for 2006/07 and 2007/08 to cover anticipated average cost pressures on schools.

1.4 From 2008/09 schools will have multi year budgets in line with the Spending Review cycle. The next two years (2006/07 and 2007/08) will be a transitional phase, with schools receiving two year budgets in 2006/07 and a one year budget in 2007/08. This is a significant change in the three year budgets proposed in the original consultation and arises because of changes in the overall Spending Review timetable. Proposals for academic year budgets have been postponed for the transitional period.

1.5 Multi year budgets will be required for the whole Schools Budget, including centrally held items (e.g. early years, SEN and EOTAS). The limit on increases in Central spending within the Schools Budget will continue within DSG, with Schools Forums having new powers to agree to increases in the limit.

1.6 Provision has also been made to ensure that DSG does not inhibit appropriate flexible arrangements in support of the Children's Services. Local authorities will be allowed to combine some of their centrally held Schools Budget with budgets of other local authority services and other agencies, where there are clear benefits for schools and pupils. The Schools Forum will have to agree to the deduction, and the education benefit must be broadly proportionate to the deduction made.

1.7 The Standards Fund grants for schools will be combined into one School Development Grant (SDG). The local authority matched funding of these grants will be ended, with a transfer from the DSG to specific grants. The Standards Fund grants spent at local authority level are being considered separately as part of an exercise to rationalise local authority grants.

1.8 The Schools Standards Grant will remain separate from both DSG and SDG for the transitional period, leaving schools with three separate specific grant funding streams from the DfES. Its distribution formula will be changed from the current stepped approach based on pupil numbers to a fairer formula with a flat rate and per pupil amount. The Government will consider bringing SDG and SSG together into a new single standards grant from 2008/09, but currently still sees this as being separate from DSG.

1.9 Schools Forums are being given decision making roles in addition to their current advisory role. These are decisions currently made by the Secretary of State and include minor changes to the operation of the MFG and increases in the centrally retained expenditure limit. Changes are being made on the constitutions of Schools Forums - in particular removing the right of elected members and officers of a local authority to be members of the Schools Forum. In Hampshire the Executive Member for Education is a member of the Schools Forum.

1.10 Finally the DfES has stated that it expects all secondary schools to have met the Schools Financial Management Standard by March 2007. The standard is new and there is currently no assessment framework. It is not yet clear how the assessment process will be funded or resourced.

2 Consultation on a new distribution method for DSG

2.1 At the same time the DfES launched a further consultation about the formula to be used to distribute DSG to authorities.

2.2 This consultation arises as a result of a number of responses from those authorities which currently spend in excess of Schools FSS, as Hampshire County Council does, which expressed concern that the extra funding currently put into schools would be lost over time.

2.3 The proposal is therefore to move to a new distribution methodology for 2006/07 for the transitional period. Principles for deciding on distribution criteria are set out.

2.4 The proposal is to establish a baseline for each authority using their Schools Budget for 2005/06. All authorities receive the same minimum increase per pupil as an addition to this baseline and the remaining funding would then be distributed according to other formula based criteria. With a minimum increase of 5% per pupil the remaining funding for distribution would be around £450m in 2006/07.

2.5 The advantages of the proposed system are explained as:

· resolving the problem of authorities spending above FSS by incorporating that spend into their baseline

· allowing funding to more easily be directed to current priorities which can currently be frustrated by the system of floors and ceilings, and

· making it easier to transfer specific grants into DSG.

2.6 A draft response to the consultation is attached for comments before submission to the DfES for the deadline of 30 September.

2.7 The response disagrees with the move to a new distribution formula in such a short time scale. There will be no proper time for setting out and agreeing the distribution criteria and then the formula itself, nor for modelling and exemplifying the impact. Whilst the principles include many of the attributes previously set out by the Local Government Association (LGA) as defining an appropriate distribution methodology for a specific grant, these are at a very high level and leave too much work to be done in a short time scale over such a significant area - especially given the recent history of grant distribution changes, which led to the position now being addressed.

2.8 Instead the response proposes that a higher level of funding per pupil for distribution to local authorities would allow local authorities and their schools to address these distributional and funding issues locally and more responsively.

3 School Meals funding announcement

3.1 After the announcement in March 2005 of an additional £220m transitional grant funding over three years to improve the quality of schools meals, the details of distribution and conditions were finally released on 8 August 2005.

3.2 There are two Standards Funds grants. The first is the Targeted School Meals Grant, £30m in 2005/06 and £50m in the following two years, payable to local authorities with 70% of the grant allocated according to pupil numbers, and 30% on free school meals numbers. Hampshire County Council's allocation is £651,103 for 2005/06. This grant is to support the transformation of meals in all schools and pupil referral units (PRUs) in each authority. There are no specific devolution requirements, authorities will determine this in conjunction with their Schools Forum.

3.3 The Government's expectation is that local authorities will lead the development and implementation of a local strategy to deliver a high quality, sustainable school meals service. The strategy should target spending on the areas which will have the biggest impact on school meals in the area. It is a condition of funding that this strategy should include plans to begin the reintroduction of universal hot meals provision, where it does not already exist by September 2008. School meals should be placed on a sustainable footing at a level of quality which at least meets the nutritional standards for school meals that become mandatory in September 2006.

3.4 Without the draft nutritional standards it is not possible at present to identify the service and cost effects in secondary schools of these changes because of the cafeteria system for provision. In primary and special schools with set meal provision, it is clearer that the impact is expected to be on the choice and cost of ingredients and on securing the provision of hot meals in all cases. Currently in Hampshire three schools have no meals provision and another four have no hot meals provision. The current part time attendance at most PRUs and nursery schools means they have no hot meals provision and the longer term requirements will depend on how much of the day is spent on those premises.

3.5 HC3S provides school meals to 473 schools in Hampshire, whilst 57 schools make their own provision. In 54 schools the current hot meals are transported to the school which has a servery rather than a full kitchen. While the full strategy is being worked up it is clear that all new schools must have kitchens and that the County Council should not agree to any kitchen closures. It would be appropriate to encourage diocesan authorities and aided school governing bodies to make similar commitments. HC3S has introduced healthier menus in primary schools from this term and will be looking to offer suitable support to enable schools to make good use of the grants which they will receive directly. Discussions will be held with the Schools Forum at its meeting on
27 September 2005 on the development of the strategy and the proposals for the use of the grant. Unless the nutritional standards information is known it may well be necessary to return to the November meeting of the Forum. The strategy will be taken for decision and approval to the Executive Member for Education.

3.6 The second grant is the School Meals Grant to be paid to all schools and PRUs. The grant is £30 million per annum for the three years, distributed on a formula basis through the local authority with a per school and per pupil element. The grant will not be ring fenced for schools. For Hampshire schools the grant totals around £700,000. Again the purpose is to support the transformation of school meals and the target for schools is again to place schools meals on a sustainable footing meeting nutritional standards.

4 Legal implications

4.1 Draft regulations are currently out for consultation to change the powers and operation of Schools Forums.

4.2 School meal minimum nutritional standards become mandatory in September 2006.

5 Financial implications

5.1 These are set out in the report.

6 Personnel implications

6.1 There are no personnel implications from the schools funding announcement. The training and personnel implications of the Schools meals developments will be picked up through the local strategy.

7 Impact assessment

7.1 These three changes will have no impact on race equality with funding distributed on a per pupil basis, including deprivation factors such as free school meals.

8 Conclusions

8.1 The Cabinet are asked to comment on and endorse a response to the consultation on a modified distribution method for the Dedicated Schools Grant.

8.2 The School Meals Strategy will need to be developed to meet the requirements of the Targeted School Meals Grant and submitted to the Executive Member for Education for approval.

Section 100 D - Local Government Act 1972 - background documents

The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

Written statement from the Minister of State for Schools on Schools funding from 2006/07, made on 21 July 2005

Consultation on a modified distribution method for Dedicated schools grant for 2006/07 and 2007/08 issued by the DfES on 5 August 2005

School Meals Funding for 2005-2006, letter from DfES dated 8 August 2005