Item 9
Newcastle Schools Forum
19 January 2016
School Funding Formula 2016/17
Report by: Julie Cordiner
For Decision
1.
Recommendation
1.1
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.
2.
Background
2.1
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.
2.2
Once 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.
2.3
A 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.
2.4
Whilst 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.
2.5
This 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.
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3.
Data changes
3.1
There 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.
Item
Primary roll
KS3 roll
KS4 roll
FSM
IDACI Band 1
IDACI Band 2
IDACI Band 3
IDACI Band 4
IDACI Band 5
IDACI Band 6
LAC (March)
EAL
Mobility
HILC
Table 1 – Data changes
October 2015
October 2014
Change
Primary Secondary Primary Secondary Primary Secondary
20,622
20,117
+505
7,276
7,261
+15
4,782
4,723
+59
4,761
2,708
5,442
3,088
-682
-380
1,768
1,033
1,810
1,145
-42
-112
1,238
754
960
517
+278
+237
3,392
2,044
2,915
1,735
+477
+310
4,803
2,683
2,879
1,654 +1,923
+1,029
1,453
781
1,619
1,017
-166
-236
738
392
3,957
2,155
-3,218
-1,762
181
209
-27
3,234
496
3,109
436
+125
+60
386
61
431
61
-46
0
4,982
2,801
5,206
2,929
-225
-129
3.2
The 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.
3.3
The 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.
3.4
IDACI rates are presented as values between 0 and 1. DfE allocates IDACI rates
into bands for the funding model. The bands are:
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Table 2 – IDACI bands
IDACI Score
IDACI band
0
0.0 - 0.2
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
3.5
For 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.
4.
Impact of data changes on allocations
4.1
Normally 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.
4.2
The 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, including nonpupil driven factors such as rates and PFI.
Table 3 – Impact of Model 1 2016/17
based on 2015/16 values and new data
Item
Primary AWPU
KS3 AWPU
KS4 AWPU
FSM
IDACI Band 1
IDACI Band 2
IDACI Band 3
IDACI Band 4
IDACI Band 5
IDACI Band 6
LAC (March census)
EAL
Mobility
HILC
Lump sum
Rates
PFI funding
Additional lump sum
Total pre MFG
Change
Primary
Secondary
Total
+1,407,160
+1,407,160
+58,149
+58,149
+261,037
+261,037 +1,726,346
-846,447
-525,758 -1,372,205
-7,196
-7,196
+42,964
+42,964
+101,519
+101,519
+523,928
+782,203 +1,306,131
-60,166
-202,621
-262,787
-1,247,699 -1,326,438 -2,574,137 -2,765,710
-27,332
-27,332
+68,998
+31,167
+100,165
+29,302
-43,532
-43,532
-258,397
-273,301
-531,698
-531,698
0
0
+28,339
+28,339
-11,257
-11,257
+94,082
+77,000
+77,000
-1,447,679
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4.3
Model 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 narrow the attainment gap. It also
slightly increases the primary : secondary ratio, from 1:1.413 to 1:1.419.
4.4
This 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.
4.5
When analysing the data that underpins the formula, we should bear in mind the
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.
4.6
It 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 wellfunded LAs in 2015/16. LAs received the higher of the MFL formula of their current
DSG.
4.8
In 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
4.9
It 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 that are dependent on MFG protection
and if possible allow other schools’ gains to flow through.
4.10
Officers believe that 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.
4.11
As 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
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Item 9
funding between the pots to achieve the optimal result. An alternative model is
therefore being explored.
5.
5.1
Alternative model
An alternative model should seek to increase the amount of money allocated to
factors with declining data. This will increase the unit values and partially
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.
5.2
Without 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.
6.
Notional SEN budget
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.
6.1
6.2
Most 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 lowcost, high-incidence SEN (prior attainment) factor to calculate the notional
SEN budget.’
6.3
However, Newcastle’s current method for defining the notional SEN budget is
based solely on the prior attainment factor (High Incidence Low Cost – HILC).
6.4
As 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.
6.5
The 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.
6.6
The 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
6.7
This 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:
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Item 9
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
6.8
However, 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
6.9
This 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.
6.10
If 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 Secondary
Total
£m
£m
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
6.11
These 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.
6.12
Forum 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.
7.
Recommendations
7.1
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.
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