I received a very pleasant letter from the Minister the other day, which clarified my understanding of the clause and its implications. Again, it is a short clause—it has only two lines—but behind it hides a schedule and a wealth of detail and consideration that are not even in the legislation but are probably worth airing in part.
With your leave, Mr. Forth, I shall indulge myself, if not the Committee, and if I can test my understanding of the clause, I will be mightily reassured. As I understand them, the schedule and its proposed new subsections change the date at which schools know their budget, and give their budget a three-year predictability.
I am trying to get to grips with the consequential effects on the structure of the school budget and the local authority budget. In recent history, formula funding shares were agreed for education, an element of which eventually becomes the aggregated schools budget, and the local education authority keeps an element for its statutory functions, which the Government want it to carry out.
Other money is taken back from the LEA, subject to an overall ceiling of how much the LEA can spend in total, relative to the school budget for various services that the LEAs will provide in different parts of the country. The money is extracted from the schools budget. From time to time, the LEAs also lay out a third level of services, and schools are freed from their devolved budgets to buy into them. As I said, this is all subject to an overall limit on what LEA spend should be compared with the total sum.
The new arrangement, if I have come to terms with it, is that schools will have a designated budget for three years. I assume that every local authority settlement will contain a different specific sum that is reserved for necessary local authority functions as defined by the Secretary of State.
Money from the designated school budget may still come back to the local authority so that it can perform various functions, subject to the approval of the school forum. I said in the Chamber that that put an extra lock into the process and was an extra obstacle against local authorities carrying out their strategic functions. To my eternal discredit, I was wrong.
I understand now that that is not the case. Whereas such an agreement would formerly have needed to be ratified by the Secretary of State, he is now not necessarily involved. The forum can agree it on site with the LEA, and the schools can agree on how to administer certain strategic functions for the local authority under the designated school budget. I think that I am correct in saying that even if there is no agreement between the forum and the local authority, and the local authority cannot carry out what it sees as a major strategic purpose, it may subsequently apply to the Secretary of State, who will then use the judgment of Solomon. That is not quite as reprehensible a state of affairs as I said it was a week or so ago. I apologise to the Secretary of State for not getting it right first time.
None the less, I wish to make a few comments on the arrangements. The forums will clearly play a crucial role. The forum is a relatively new beast, and many local authorities and many in the teaching profession probably do not appreciate how important it is likely to become. I wonder whether any thought has been given to the exact structure of the forums or to whether the issues are better left to the discretion of local authorities and schools.
I shall try to crystallise that point by referring to a case from my neck of the woods, where the school formula was changed with the agreement of the forum, but in a way that had particular disadvantages for infant-only schools, which were sorely aggrieved. When the issue was looked into, it was discovered that there was no infant representation on the forum. School forums with functions in that particular format will obviously have problems, and that will lead to a good number of appeals being made over their heads to the Secretary of State. The question is whether we are satisfied that forums are good enough for the task in hand.
Other issues raised by the local authorities are also important. In one sense, the designated school budget is money being parcelled up by the Government and sent to specific schools. I presume that it will be pitched at a level that is judged to be nationally appropriate, and that it will therefore to some extent override pre-existing formulas. As we know, some local authorities are more generous to their schools than others. The general fear is that we may be moving towards the national funding of schools and that, subject to certain criteria, every school will get the same type of deal.
Schools in impoverished areas will obviously get a different deal from those in suburban and relatively rich areas, but it seems that a national prescription will nevertheless apply. I cannot see how that will be accomplished under the Bill, however, because it is obvious that when schools receive their designated school budget they may get a further exhibition of largesse from the local authority. Nothing in the Bill will stop them saying, “This is what the Government have given by way of designated budget, but we normally give you a lot more. Here, have the additional money.” That will necessarily lead to problems for local authorities that, even though they are not funded to do so, currently fund their schools at a higher level. I would welcome the Minister’s thoughts on the question whether all schools will have the same formula. Is that the destination or at least the likely outcome?
We have all received a good amount of lobbying from the Local Government Association, which seems to have objected in principle to the three-year deal. I apologise if I have not understood it correctly, but the line seems to be that if the money is set aside for the schools for three years or three years ahead, it circumscribes and limits local decision making, local strategic manoeuvres and so on. I am a little unconvinced by that argument, as many local authorities wish to move or are moving to three-year budgets. They are budgeting in a fairly formal way on a three-year cycle.
I remember long before I was in this place—longer ago than I care to remember—speaking about budgets to the hon. Member for Bootle (Mr. Benton) when we were on the same council. We went through the ordeal of a council budget every year, which meant a lot of burning of the midnight oil. I said to him across the chamber that what we really wanted was three-year budgets. That must have been 15 or more years ago. He took me aside and, speaking very kindly, said that that sad illusion would never be fulfilled. We are near to fulfilling it, and I do not think that the LGA should have any reason for opposing that. Obviously, the Minister may wish to comment on its representation.
Let me first address the last of the three sets of comments made by the hon. Member for Southport. It is fair to say that the LGA has expressed several concerns about the ring-fencing arrangements that we have put in place, but I believe that they are a sensible approach to giving schools the stability that they have rightly been asking for and to assisting them in planning for the future.
It is true that there is both an upside and a downside to three-year budgeting. We discussed in an Adjournment debate in Westminster Hall a few weeks ago the trade-off between certainty and flexibility to meet the changing needs of a changing school population. That is one of the issues on which the Government are consulting at present. We welcome comments from colleagues of all parties, although the consultation is principally with schools and local governments. The hon. Gentleman answered his third point himself, in that we can give reassurance. The general trend of policy is indeed towards three-year budgets, which are advantageous to local government as well as to schools.
The hon. Gentleman’s first point was about the schools forums. The position that he described was accurate and correct—in a sense, he corrected the comments that he made on Second Reading—so I do not need to repeat it. He raised a perfectly reasonable point by asking, in the light of the role that schools forums were taking on, whether we needed to consider how they operated their constitution, voting procedures and so on. At this stage, the best thing for me to say is that we will consider whether any changes are required to the regulations dealing with the constitution and procedures of schools forums. We shall have to take the opportunity to have discuss those matters if revisions are needed in the light of the new decision-making powers. My Department’s preference would be to build on what we view, by and large, as very good practice in schools forums and to issue guidance that we hope will be widely adopted. In doing that, it is clear that we will need to take into account the kind of circumstance that he described from his constituency experience.
Finally, let me address the hon. Gentleman’s question about whether the measure is, in essence, a move to a national funding formula. It is worth while to emphasise that, although we are creating a dedicated schools budget and saying to local governments that they must spend the funds on their schools, we are also continuing with the LEA’s important role in schools funding. There will still be a local formula for distributing funds locally.
In recent changes to schools funding, we established the principle of having a core amount of money that any pupil in any part of the country would get, and then top-ups for factors such as deprivation, rural sparsity and so on. Clearly, we continue to debate in this House and elsewhere whether the mix between those two aspects is right, but even with the ring-fenced, dedicated schools budget, at the local level, the authority will still decide in conjunction with its schools on a local formula for distributing the money.
The Minister will know that there is significant variation at present in the amount passed to schools by their LEAs. My authority in the London borough of Havering is extremely good. It is an extremely lean and efficient organisation at the centre, and it passports the absolute maximum to its schools. Sadly, that is not the case in some authorities elsewhere in the country. There are significant variations. It would be much better if school funding were passed directly from the Secretary of State to individual schools rather than channelled through LEAs, so that head teachers and governors had total control over their own budgets and could plan much more effectively.
There would be advantages to that alternative, but there would also be disadvantages. We certainly considered the option of a national formula when we were deciding how to take forward school funding. In the end, we decided to adopt one aspect: the guarantee to get money to schools. That is what the legislation does through the dedicated schools grant, but there is still local flexibility to meet particular local circumstances. I am not convinced that central Government are best placed to decide the budget of each and every school in the country. We can decide how much goes to each local area, but the decision about distributing that money within the local area is best taken locally.
The method by which funding would be passed directly from Government to individual schools would need certain elements, such as a per-pupil element and elements to reflect local circumstances, such as areas of deprivation, large numbers of children without English as a first language and unusually high numbers of children with special needs. All sorts of elements would have to be taken into consideration, but it would still be possible to fund directly in that way.
The hon. Lady is right that one could construct a formula, but it would inevitably be less flexible than allowing an element of local decision making. People often talk to me about mobility—pupils moving in and out of an area. Some schools have very high mobility, for many different reasons, and others have much lower levels.
Our national formula has no element at all to cover that issue, but the formula of some local authorities will have a local element for it. There is sense in saying that some areas exhibit much higher levels of pupil mobility than others and that those matters should be decided locally. We can, of course, consider adding that element to the national formula, but I am not convinced that we can get every little bit right in the national formula to meet the needs of more than 20,000 schools throughout the country. I am sure that that debate will continue.
I believe that I have dealt with all the points made by the hon. Member for Southport, but I shall happily respond to them again if he wants to return to them.