Item 9

Newcastle Schools Forum

19January2016

School Funding Formula 2016/17

Report by:Julie Cordiner

  1. Recommendation
  2. That the Schools Forum discusses and gives views on the options for the 2016/17 school funding formula and notional SEN budget, to guide the local authority’s final decisions.
  1. Background
  1. Local authorities (LAs) are required to set a school funding formula based on a list of permitted factors. In October a proforma is submitted to DfE with details of the factors that the authority intends to use. Values in the formula are provisional, but the structure is set at this point and cannot be changed.

2.2Once the October census data has been cleaned and verified by DfE, and DSG allocations have been published, the LA balances the budget in order to identify how much is available for the Individual Schools Budget (ISB), i.e. the total of school budget shares.

2.3A revised proforma is submitted by 21st January with details of the data and unit values for each factor. At this point, we are committed to the formula and budget shares will be calculated on this basis.DfE do not permit in-year allocations to be made to schools (except for payments from approved central budgets such as the Growth Fund), because EFA have no way of replicating them for academies.

2.4Whilst the Schools Forum decides the structure of the formula, the LA takes decisions on how much should go into each factor. However, the authority believes it is important that schools have the opportunity to consider the options and advise the LA on the key principles that they believe should be taken into account in making the decision.

2.5This report outlines the data changes and their impact on the rolling forward of the formula. It identifies issues with the data-driven model, and proposes an alternative approach to optimise the position for schools, which is achievable within the available resources.

  1. Data changes

3.1There have been some significant changes to the final data in the October 2015 census from the previous year, particularly in relation to deprivation and prior attainment. The table below provides a detailed breakdown.

Table 1 – Data changes
Item / October 2015 / October 2014 / Change
Primary / Secondary / Primary / Secondary / Primary / Secondary
Primary roll / 20,622 / 20,117 / +505
KS3 roll / 7,276 / 7,261 / +15
KS4 roll / 4,782 / 4,723 / +59
FSM / 4,761 / 2,708 / 5,442 / 3,088 / -682 / -380
IDACI Band 1 / 1,768 / 1,033 / 1,810 / 1,145 / -42 / -112
IDACI Band 2 / 1,238 / 754 / 960 / 517 / +278 / +237
IDACI Band 3 / 3,392 / 2,044 / 2,915 / 1,735 / +477 / +310
IDACI Band 4 / 4,803 / 2,683 / 2,879 / 1,654 / +1,923 / +1,029
IDACI Band 5 / 1,453 / 781 / 1,619 / 1,017 / -166 / -236
IDACI Band 6 / 738 / 392 / 3,957 / 2,155 / -3,218 / -1,762
LAC (March) / 181 / 209 / -27
EAL / 3,234 / 496 / 3,109 / 436 / +125 / +60
Mobility / 386 / 61 / 431 / 61 / -46 / 0
HILC / 4,982 / 2,801 / 5,206 / 2,929 / -225 / -129

3.2The main messages from the data changes are:

  • Growth of 2.5% in primary rolls and 0.6% in secondary rolls
  • A drop in FSM eligibility of 12% in both sectors
  • Significant changes in the mix of pupils across IDACI bands
  • A reduction in Looked After Children on roll in Newcastle schools
  • English as an Additional Language (EAL) increases of 4% in primary aged and 13.8% in secondary aged pupils
  • A 10.6% reduction in pupil mobility in the primary sector
  • A drop in high incidence low cost (HILC) SEN data of around 4% in both sectors, as attainment has improved at EYFS and KS2.

3.3The Income Deprivation Affecting Children Index (IDACI) is the proportion of all children aged 0 to 15 living in income deprived families. Rates are calculated for Lower Layer Super Output Area (LLSOA), which are geographical areas that contain around 650 households equating to around 1500 residents. Income deprived families are defined as those who receive:

  • Income Support or income-based Jobseekers Allowance;
  • Income-based Employment and Support Allowance;
  • Pension Credit (Guarantee);
  • Working Tax Credit or Child Tax Credit with an equivalised income (excluding housing benefit) below 60 per cent of the national median before housing costs.

3.4IDACI rates are presented as values between 0 and 1. DfE allocates IDACI rates into bands for the funding model. The bands are:

Table 2 – IDACI bands
IDACIScore / IDACIband
0.0 -0.2 / 0
0.2-0.25 / 1
0.25-0.3 / 2
0.3-0.4 / 3
0.4-0.5 / 4
0.5-0.6 / 5
0.6 -1 / 6

3.5For 2016/17, the IDACI data has been updated from 2010 to 2015, with the updated index showing a substantial drop in deprivation rates in Newcastle, especially in the top two bands. Other LAs in the North East have also seen their rates fall.Although there would be some inevitable variation due to cohort changes over the two years, the vast majority of the variation can be explained by the updating of the measure.

  1. Impact of data changes on allocations

4.1Normally the first draft of the formula is developed by allowing the new data to flow through, using the previous year’s unit values for each factor.This year there have been some unexpected outcomes from this exercise.

4.2The Budget 2016/17 report highlighted the financial impact of this first draft, which we will call Model 1. Table 3 below shows the changes by sector, includingnon-pupil driven factors such as rates and PFI.

Table 3 – Impact of Model 1 2016/17
based on 2015/16 values and new data
Item / Change
Primary / Secondary / Total
Primary AWPU / +1,407,160 / +1,407,160 / +1,726,346
KS3 AWPU / +58,149 / +58,149
KS4 AWPU / +261,037 / +261,037
FSM / -846,447 / -525,758 / -1,372,205 / -2,765,710
IDACI Band 1 / -7,196 / -7,196
IDACI Band 2 / +42,964 / +42,964
IDACI Band 3 / +101,519 / +101,519
IDACI Band 4 / +523,928 / +782,203 / +1,306,131
IDACI Band 5 / -60,166 / -202,621 / -262,787
IDACI Band 6 / -1,247,699 / -1,326,438 / -2,574,137
LAC (March census) / -27,332 / -27,332 / +29,302
EAL / +68,998 / +31,167 / +100,165
Mobility / -43,532 / -43,532
HILC / -258,397 / -273,301 / -531,698 / -531,698
Lump sum / 0 / 0
Rates / +28,339 / +28,339 / +94,082
PFI funding / -11,257 / -11,257
Additional lump sum / +77,000 / +77,000
Total pre MFG / -1,447,679

4.3Model 1 creates significant volatility for individual schools, the pure formula ranging from a loss of £414k to a gain of £384k (although changes in pupil numbers are responsible for some of the variation). The sudden loss of deprivation funding could make it more difficult for some schools to narrowthe attainment gap. It also slightly increases the primary : secondary ratio, from 1:1.413 to 1:1.419.

4.4This model would generate a large increase in the number of schools triggering the Minimum Funding Guarantee (MFG), from 26 primary and 4 middle/ secondary in 2015/16 to 45 primary and 12 middle/secondary in 2016/17. The cost of MFG would increase from £1.085m to £2.74m, which is not affordable given the high needs pressures. The only way of balancing it would be to impose a 0% cap, i.e. those with gains would not be able to receive any of the increase.

4.5When analysing the data that underpins the formula, we should bear in mindthe purpose of the funding, i.e. supporting children to achieve. The changes in FSM eligibility and the 5-year updating of IDACI data may not translate immediately into visible improvements in children’s prospects for attainment. Parents may move into employment, but could be on a zero hours contract or earn just above the FSM threshold, and the family can still be in poverty.

4.6It is possible that the government may include the Ever 6 FSM indicator in the National Funding Formula (NFF). This would bring more Newcastle pupils into Eligibility, particularly in secondary schools, compared to our current single census indicator

4.7 However, the NFF unit value may be lower. In 2015/16 DfE undertook a ‘Minimum Funding Level’ (MFL) exercise, with the aim of increasing funding for the least well- funded LAs in 2015/16. LAs received the higher of the MFL formula of their current DSG.

4.8In relation to deprivation, the MFL formula used a mix of FSM entitlement and IDACI bandings, with a range of £882 to £1,573 per eligible pupil for primary and £1,052 to £1,871 for secondary schools. The top range values are lower than our combined local value for FSM plus the highest IDACI band, which total £1,644 for primary and £2,153 for secondary schools

4.9It is worth remembering that 2016/17 will form the baseline for any protection arrangements when the NFF is introduced in 2017/18. It is therefore desirable to balance the formula to achieve the best possible outcome for schools, which generally will be to minimise the number thatare dependent on MFG protection and if possible allow other schools’ gains to flow through.

4.10Officers believethat the preferred approach would be to use some of the funding that would have been required to cover the MFG in Model 1 to increase formula pots where data has reduced. This will create genuine increases rather than the artificial MFG protection, and should take some schools out of MFG.

4.11As outlined in the budget report, after covering pressures due to increased numbers of pupils requiring specialist SEND provision, there is some residual DSG to add to the data-led model. The challenge is to find the right blend of funding between the pots to achieve the optimal result. An alternative model is therefore being explored.

  1. Alternative model
  2. An alternative model should seek to increase the amount of money allocated to factors with declining data. This will increase the unit valuesandpartially compensate for the lower number of eligible pupils. It should reduce the Minimum Funding Guarantee, although the varying data at individual school level means it is not a straightforward calculation; this is a process of trial and error.

5.2Without undertaking detailed workings, it is not possible to estimate whether it is possible to balance to the target ISB of £149.093m without some degree of capping. This is a complex exercise, involving making adjustments to a range of unit values and reviewing the results. Officers are continuing to work on a Model 2 version of the formula, and will report on the results at the meeting.

  1. Notional SEN budget
  2. The notional SEN budget is not a separate budget. It is, however, identified within a school’s delegated budget as a guideline to schools on the amount within the formula that is available to cover low cost SEN.

6.2Most local authorities use proportions of a range of factors to define their notional SEN budget. DfE guidance says:

‘we think that most local authorities will want to use a combination of funding from the age-weighted pupil unit (AWPU), the deprivation factor, and the low-cost, high-incidence SEN (prior attainment) factor to calculate the notional SEN budget.’

6.3However, Newcastle’s current method for defining the notional SEN budget is based solely on the prior attainment factor (High Incidence Low Cost – HILC).

6.4As noted in Table 3, the HILC factor has reduced by £532k from £12.435m to £11.903m. This volatility could cause confusion for schools and result in variable demand on the High Needs Budget between years, which would be difficult to manage.

6.5The LA is minded to review the calculation method to achieve a notional SEN budget that is more in line with the national recommendations. It is likely that the DfE will prescribe a national calculation for this as part of the NFF in any event.

6.6The guidance gives illustrative examples based on the following formula:

  • AWPU – 4% primary, 3.75% secondary
  • FSM - 47% primary, 60% secondary
  • 100% of low prior attainment

6.7This resulted in a notional SEN budget of £104,985 for a primary school with 300 pupils (average of £350 per pupil), and £363,000 for a secondary school with 1000 pupils (average of £363 per pupil). The examples used the following for the relevant factors:

Table 4 – DfE illustrative examples
Factor / Primary / Secondary
AWPU / £2,500 / £4,000
FSM eligibility / 17% / 16%
FSM unit value / £500 / £500
Prior attainment eligibility / 21% / 11%
Prior attainment value / £1,000 / £1,000

6.8However, Newcastle’s eligibility and factor values in 2015/16 were different to the assumptions in the national guidance model:

Table 5 – Newcastle values 2015/16
Factor / Primary / Secondary
AWPU / £2,606 / £4,092
FSM eligibility / 27% / 26%
FSM unit value / £1,262 / £1,383
Prior attainment eligibility / 26% / 24%
Prior attainment value / £1,195 / £2,121

6.9This suggests that incidence of SEN will be higher in Newcastle than the exemplar schools in the guidance, and therefore the value of the notional SEN budget should be higher. All schools work on an assumption that the first £6,000 of additional support costs are funded from school budget share, so if there are more pupils with SEN then it is valid to have a higher notional SEN budget.

6.10If the same formula were applied to Newcastle’s factors, the results would be as follows:

Table 7 – 2015/16 reworked on national approach
Factor / Primary £m / Secondary £m / Total
AWPU / 2.097 / 1.839 / 3.936
FSM / 3.229 / 2.562 / 5.791
Prior attainment / 6.221 / 6.213 / 12.435
Total / 11.547 / 10.615 / 22.162

6.11These are based on 2015/16 data and values; we would need to recast them based on 2016/17 data and values from the final formula.

6.12Forum members are invited to comment on the proposal to move towards the national guidance levels, working towards what is likely to be a national system from 2017/18.

  1. Recommendations

7.1That the Schools Forum discusses and gives views on the options for the 2016/17 school funding formula and notional SEN budget, to guide the local authority’s final decisions.

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