What is the NFF?

The National Funding Formula is the method that the Government is proposing to use to decide how much money should be given to English state schools each year. It aims to remove funding discrepancies arising from budgets being allocated by local authorities by making sure school budgets are set using the same criteria (at least in theory).

No new money

The NFF is a distributional mechanism. It does not correct the lack of money overall in the system. The 2010s was a ‘lost decade’ for the education system. Recent research by the Institute of Fiscal Studies merely confirms what the education sector already knew. School spending per pupil in England fell by 9 per cent in real terms between 2009–10 and 2019–20. This represents the largest cut in over 40 years.

The Government was finally forced by political pressure to respond with significant increases in funding.  The Department for Education secured a three year settlement in the 2019 Spending Round which increased core schools funding in cash terms by £2.6 billion in 2020-21, £4.8 billion in 2021-22 and £7.1 billion in 2022-23, plus an amount of around £1.5bn a year to cover the increase to employer pension contributions in the Teachers’ Pension Scheme. This represents an increase of around £8.6bn a year by 2022-23.

NEU analysis indicated at the time that £12.6bn a year was needed by 2022-23 to restore per pupil funding to 2015-16 levels and pay for the increase in school costs. This £8.6bn figure was therefore a good start but can only be seen as a first instalment of a long-term plan.

Timetable

In 2018-19, the Government introduced a “soft” NFF. This meant the overall funding for schools in individual local authority areas was determined by a new national formula but distributed to schools according to the existing local formula.

The Government ultimately plans to implement a ‘hard’ NFF with a new national formula used to determine all of individual schools’ funding.  This will contain very little local flexibility, removing the power to respond to local circumstances and needs that has been in place for many years.  The Government had initially planned to implement the ‘hard’ NFF in 2020-21, but as a result of the significant challenges the NFF has presented, the Government has delayed implementation. The NEU is aware that the Government does not intend to implement a hard formula in 2022-23.

The Government will have to introduce primary legislation to move to a hard formula, which will probably require at least two public consultations so the timetable is at best unclear. However, at some point, if the hard NFF is implemented, many areas will see significant shifts and disruption in the distribution of funding between local schools.  We are keen to pick up any problems caused by these shifts.

Design of the NFF

The large majority of funding for schools will be allocated through the Schools Block of the new funding system.  Schools will also receive money via the high needs block, early years block and 16-19 funding block depending on the nature of their provision.  Pupil premium funding will continue to operate as a separate grant.  A central school services block will provide funding for LAs’ continuing responsibilities.

The Schools Block NFF will distribute funding according to “pupil-led” and “school-led” factors.

Pupil-led factors include the basic amount of funding per pupil and funding for additional needs delivered through factors for deprivation, low prior attainment, English as an additional language and mobility.

School-led factors include a lump sum for each school and funding delivered through factors such as sparsity, pupil growth and premises-related factors such as split sites, rates and PFI costs.  A key concern is the need to protect small and rural schools, with work underway to ensure that the lump sum and sparsity costs do so adequately.

Minimum per pupil levels

The position is complicated by the introduction of minimum per pupil funding levels. These guarantee minimum funding levels of £3,750 per pupil in primary schools in 2020-21 and £5,000 in secondary schools.

The concept of a minimum per pupil level sits uneasily with an NFF. If the Government believes the NFF provides sufficient funding, then there is no logical need for MPPLs. The only inference to draw is that the Government does not believe the NFF provides sufficient funding.

The existence of MPPLs will channel money towards areas with lower levels of need. This ignores the claims of pupils in poorer areas, who tend to have greater needs. The NEU estimates that one-third of schools will have lost out in 2020-21 as their costs will rise faster than their funding increase. The NEU believes that these proposals will have a disproportionate impact on BAME pupils, who are more likely to live in areas which will not benefit from the introduction of minimum per pupil funding levels.