Overall Trends in Spending
Luke Sibieta
Institute for Fiscal Studies
June 10, 2008
Brief Outline
• Discuss overall trends in education spending
• Particularly the implications of the CSR
settlement
• Recent trends in schools spending
• Composition and trends over time
• International Comparisons
• Spending per pupil pledge in Budget 2006
UK Education Spending – 96/97 to 10/11
Labour 2:
6.1%
Actual Increases
Planned Increases
8
7
6
5
4
3
2
1
0
-1
-2
10–11
09–10
08–09
07–08
06–07
05–06
04–05
03–04
02–03
01–02
00–01
99–00
98–99
CSR: 3.4%
97–98
Percentage real increase
Labour to date
4.3%
Financial year
Note: Assumes GDP deflator of 2.7% per year going forwards
Source: HM Treasury; IFS calculations
As a proportion of national income
(78/79 to 10/11)
Share of national income
6
5.75
5.5
5.25
5
4.75
4.5
4.25
4
1978-79 1981-82 1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09
Education
Financial year
Long Term Average for Education
CSR Plans
Note: Assumes GDP deflator of 2.7% per year going forwards
Source: HM Treasury; IFS calculations
As a proportion of national income
(78/79 to 10/11)
Share of national income
6
5.75
5.5
5.25
5
4.75
4.5
4.25
4
1978-79 1981-82 1984-85 1987-88 1990-91 1993-94 1996-97 1999-00 2002-03 2005-06 2008-09
Financial year
Education
CSR Plans
Note: Assumes GDP deflator of 2.7% per year going forwards
Source: HM Treasury; IFS calculations
Schools Spending
• Pattern of real increases is similar to that of
education spending
• Composition of schools spending
• Higher proportion of spending on under 5s
• Higher proportion on capital spending
• Slightly lower proportions on current
spending in primary and secondary sector.
Matching private school spending
• “ Our long-term aim should be to ensure for
100 per cent of our children the educational
support now available to just 10 per cent”
• By which he meant increasing spending per
pupil in the state sector to that currently seen
in the independent sector
• £8,550 per pupil in 2005-06 (in today’s
prices)
Source: HM Treasury
More to do to close the gap
Remaining
shortfall in
2010, £2,390
Private spend
= £8,500
Extra current
over CSR
period, £320
Extra capital
over CSR
period, £160
2007-08 Spend,
£5,550
Lower Pupil
Numbers, £90
Note: 2007–08 Prices
Source: HM Treasury; IFS calculations
How much to close the gap?
• Gap remaining would be £2,390
• To meet in 2010–11, would cost
• £2,390 per pupil * 7.5m pupils ≈
£18.0bn
• When would it be met assuming…
• growth under CSR 07 (3.4%): 2020–
21
• growth in economy (2.5%): 2023–24
How significant is the pledge?
• Not closing the contemporaneous gap
• Private spending per pupil likely to grow in real terms
Spending per pupil in state and private sectors
£10,000
Spend per Pupil
£8,000
£6,000
£4,000
£2,000
£0
97–98 98–99 99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10 10–11
Private Sector
Financial year
State Sector
CSR07 projection
Note: Assumes GDP deflator of 2.7% per year going forwards
Source: ISC, HM Treasury; IFS calculations
State spending per pupil as a proportion of that in
the independent sector
0.9
0.8
0.7
?
0.6
0.5
0.4
0.3
97–98 98–99 99–00 00–01 01–02 02–03 03–04 04–05 05–06 06–07 07–08 08–09 09–10 10–11
Financial year
Note: Assumes GDP deflator of 2.7% per year going forwards
Source: ISC; HM Treasury; IFS calculations
Summary
• Large increases in education spending since
Labour came to power
• Slow down in rate of growth over the CSR
• Strong increases in per pupil spending
• Budget 2006 per pupil pledge
• Does not close the contemporaneous gap
The school funding system
Outline of the chapter
• How does the system currently function
• Allocating funds to local authorities
• Allocating funds to schools
• Changes to the current system
• Future changes to the system
Allocating funds to
local authorities
Stage 2: Nonschools education
spending
Stage 3: Learning
and Skills Council
Stage 1: Total
Education Spending
for England
Stage 2: Schools
Spending
Stage 3: Dedicated
Schools Grant
“Spend plus”
Methodology
More Direct
Grants and
Payments
Stage 3: Other
Specific Grants
“Ring-Fenced” for
Schools Budget
Stage 4: Other
Sources of funds
Stage 4: Local Authority Schools Budget
Allocating
funds to
schools
Stage 4: Local Authority Schools Budget
Stage 5: Individual
Schools Budget
Minimum Funding
Guarantee
Stage 5: Central
Services
Direct Grants and
“Fair Funding” Formula:
Payments
number of pupils, social
deprivation, SEN
Stage 6: Your Local School
Changes to school funding system
•
Many in the wake of 2003-04 School Funding “Crisis”
• Although Audit Commission rejected notion of any crisis
•
Measures aimed at creating stability of funding levels
• Minimum Funding Guarantee
• Historical funding levels were already important
• “Spend plus” to ensure stability of funds to Las
•
Others to reduce local authority discretion
• Ring-fencing
• In addition to an already increasing number of direct grants and
payments
•
School Forums
• Increased Role of Schools
•
A “hollowing-out” of local authorities from above and below
Future Plans
• Lower increases
• Natural result of CSR settlement
• Less constraining Minimum Funding Guarantee
• Exceptional Circumstances Grant
• Review of deprivation funding
• School balances – over £1.6 bn in 05/06
• Claw-back mechanisms?
Summary
• Phew! We got there in the end
• Hollowing out of local authorities
• Powers transferred up and down
• Focus on stability of funding levels