You are here:

House of Commons Library

School funding in England. Current system and proposals for 'fairer school funding'

Published Monday, November 21, 2016

This note provides background on the planned introduction of a national funding formula for schools in England, now due to be implemented from 2018-19. Information on reaction to the proposals can be found in sections 3 and 4.

Jump to full report >>


What is the issue?

The average amount of per pupil school funding individual local authorities in England receive from the Government each year varies considerably. Funding is distributed onwards to schools using local funding formulas, which give different weights to different factors, meaning that there are differences in the amount of per pupil funding received by individual schools within a local authority area.

Critics argue that these disparities are unfair, and that funding should more closely reflect area, school and pupil characteristics.

What is the current Government proposing?

Under the Coalition Government, the Department for Education (DfE) began the process of school funding reform, holding a number of consultations and making some important changes. Among other things, they allocated additional funding to the ‘least fairly funded’ local authorities for 2015-16. However, they stopped short of introducing a national funding formula.

In the November 2015 Spending Review, the Government confirmed it would consult on a new national school funding formula.

On 7 March 2016 Education Secretary Nicky Morgan announced the first of two consultations on further reform. This proposed a national school funding formula to include a basic per-pupil amount, and factors reflecting pupil characteristics, school and areas costs. The precise composition of the formula, and weighting given to the different factors, will be the subject of a further consultation expected later in 2016. It is therefore difficult to say at this stage how particular areas or schools are likely to be affected.

The Government originally proposed that the changes would be introduced from 2017-18, but in July 2016 it announced a delayed until 2018-19. It's intended that most funding – with the exception of high need funding – will eventually be given directly to schools and not routed through local authorities.  

'High need' funding is largely for special educational provision. On this, the Government also proposes the introduction of a national funding formula to allocate money to local authorities. However, for at least the next five years, funding allocations would continue to be calculated, in part, on the basis of LAs planned high needs spend in 2016-17 and not solely on assessed area needs, in order to ensure stability.

Reaction to proposals

Reaction to the proposals has been mixed, but there has been widespread welcome for the principle of moving toward a more transparent distribution of funding. Some have expressed concern about the fine detail and implementation of the proposals, and the potential for areas that are now comparatively ‘well-funded’ – including much of London and some other urban areas – to lose funding.

How are English schools funded now?

The Dedicated Schools Grant

The main source of revenue for state-funded schools in England is the Dedicated Schools Grant (DSG). In 2015-16 total DSG was worth £40.1 billion. This is notionally divided into three non-ringfenced blocks, the largest of which is the Schools Block at £32.2 billion, or 80 per cent of total DSG, in 2015-16. The Schools Block is intended to cover core provision for pupils in mainstream primary and secondary education up to the age of around sixteen.

For 2016-17, Schools Block allocations are largely calculated based on how much an area received per pupil in the previous year, subject to some adjustments. A key factor, therefore, in how much areas receive per pupil is how much they received historically.  

Local funding formula

Local authorities don’t distribute school funding straight on to their maintained schools; they apply a locally-determined funding formula first. There is some variation between local formulas in terms of the relative importance given to different factors like prior attainment, deprivation and sparsity. The local formula is also used in part to determine academy schools’ funding.

Progress on school funding reform since 2010

Coalition Government changes included:

  • Splitting the DSG into three notional but non-ringfenced blocks in 2013: the Schools Block; the Early Years Block; and the High Needs Block.
  • Incorporating most separate grants into the DSG.
  • Simplifying local authority funding formulas.
  • Allocating an extra £390 million in 2015-16 to the ‘least fairly funded’ local authorities.
  • Introducing the pupil premium grant in respect of disadvantaged children and service children. This was worth £2.5 billion in 2015-16, the large majority (93%) of which was the deprivation element of the premium.

Since taking office in May 2015, the Conservative Government have:

  • Rolled forward the 2015-16 £390 million fairer schools funding to 2016-17.
  • On 7 March 2016, launched a consultation on the introduction of a national funding formula with funding, for the most part, going directly to schools. A further consultation will follow later in 2016.
  • In July 2016, annuounced that introduction of the national funding formula would be moved from 2017-18 to 2018-19.

The wider school funding context

Schools in England report that they are facing rising cost pressures, especially from increased staffing costs.

In the November 2015 Spending Review, the Government said that the core schools budget would be protected in real terms over the Spending Review period, and that per pupil funding levels will be maintained in cash terms. Funding for the pupil premium would also be protected in cash terms. Savings of around £600 million would be made from the Education Services Grant (ESG). This is additional funding given to academies and local authorities for services such as human resources, school improvement and education welfare services.

The Institute for Fiscal Studies (IFS) estimated in April 2016 that there would be at least a 7% real terms reduction in per-pupil spending between 2015-16 and 2019-20, or by about 8 % if changes in the costs expected to be faced by schools, are also accounted for.

This note relates to England only.

Commons Briefing papers SN06702

Authors: Nerys Roberts; Paul Bolton

Topic: Schools

Share this page

Stay up to date

  • Subscribe to RSS feed Subscribe to Email alerts Commons Briefing papers

House of Commons Library

The House of Commons Library provides research, analysis and information services for MPs and their staff.