We reproduce this analysis by Peter Downes, an experienced headteacher and Liberal Democrat Councillor. It is based on the recent National Audit Office report on academies, which Peter sees as "an astonishing indictment of a policy initiative that got completely out of control".
Within weeks of coming to power in May 2010 the Education Secretary, Michael Gove, rushed through an Act encouraging ‘outstanding’ schools to leave their local authority and convert to become ‘academies’. It was alleged that this would give them greater freedoms, in particular the freedom to use their budget more flexibly. He was developing the policy started under the previous Labour government which had set up sponsored academies in areas of deprivation so that failing schools could be closed and re-opened as academies.
The financial arrangements were that these new academies, (called converter academies to distinguish them from the original sponsored academies), would continue to receive the funding they would have got by being a local authority (LA) school, together with an additional grant to allow them to buy in the services they would previously have received from the LA. This extra grant is known as the Local Authority Central Spend Equivalent Grant (LACSEG).
Some schools expressed an interest quickly and were given their draft LACSEG figure. They could hardly believe what they were seeing. The grant, together with a one-off grant of £25,000 to help with the transition, and other grants to help with legal and insurance costs, were giving schools a significant net bonus.
The size of the ‘bonus’ i.e. more money than they needed to replace the services they had lost, varied from area to area and depended on the size and catchment of the individual school. A great deal depended on how their Local Authority completed the official returns to central government (Section 251 returns) as these were the basis for the calculation of the LACSEG. Size of school made a big difference because the LACSEG was allocated on a per pupil basis but the cost of the extra services needed (e.g. extra administrative assistants or bursars) was not number-related. Two large secondary schools had a LACSEG of over £1 million. The catchment mattered because a converter academy would get a pro rata share of the money spent by the LA on pupils with social and behavioural problems, for example, but would not need to spend that because it had a lower than average proportion of pupils needing extra expenditure. Given that the option for conversion was originally offered to outstanding schools only, most of those were serving areas of relatively low deprivation and few social or behavioural needs.
It is difficult for any headteacher to turn down the offer of extra money, especially at a time when the general level of funding for education is being pegged back. News of the LACSEG bonus spread quickly round the headteacher networks and, not surprisingly, many could not resist the temptation and applications came flowing in. By September 2012 just over half of secondary schools had converted to academy status.
This rush of applications took the DfE by surprise. This has meant that the DfE has an overspend on its budget of £1 billion for the two financial years 2010 – 2012. This overspend is explored in detail in a report published by the National Audit Office on November 20th, 2012. The report is called ‘Managing the expansion of the Academies Programme’ and can be downloaded from http://www.nao.org.uk/publications/1213/academies_expansion.aspx
The NAO report states (para 1.7): ‘The Department initially underestimated both demand and costs. Its Impact assessment accompanying the Academies Bill assumed that 200 schools would convert in each of the first four years of the expanded programme. While 195 schools converted in year one (2010-2011), 1,103 converted in year two (2011-2012). The Assessment contained simplistic assumptions about some funding elements and omitted other costs, including sponsored academy start-up funding.‘
Would-be academies have to deal directly with officials in remote government offices, whether the DfE itself, or the Young Persons’ Learning Agency, now transmogrified into the Education Funding Agency (EFA) so there was increased bureaucratic pressure and cost at the centre. In addition, the DfE had to pay up the promised excessive LACSEG.
Although the NAO report is written in the neutral style expected of auditors, it amounts to an astonishing indictment of a policy initiative that got completely out of control. Encouraged by the apparent popularity and ‘success’ of his policy, the Secretary of State rejoiced in his achievements and instructed his officials to divert money from other budgets in order to keep the bandwagon rolling.
What is even more astonishing is the omission from the NAO report of any reference to the government’s policy statement to the effect that ‘there should be no financial advantage or disadvantage for a school converting to academy status.’
The government has clearly failed to fulfil that commitment. This ‘blind spot’ became even more apparent when the NAO’s report was considered by the House of Commons Public Accounts Committee, chaired by Margaret Hodge, on December 2nd. The Permanent Secretary at the DfE was challenged to confirm that converter academies had indeed had a financial advantage and he denied it. Later in the session, when pressed further, he modified his answer to say that some may have had an advantage but others were worse off so it more or less evened out overall. What puzzled onlookers was this: did the Permanent Secretary not really know the truth of the situation, or was he under instructions from his boss to deny it?
Given the generally parlous state of government coffers, the obvious question is: where was the extra money found? The DfE drew on £105 million from a ‘contingency fund’ and redirected £160 million from ‘previously allocated discretionary budgets’. The NAO report does not specify who lost out from losing their allocations. They took £95 million originally allocated to school improvement ‘on the basis that sponsored academies were now its main vehicle for school improvement.’ What this fails to recognise is that the money was going mainly to converter academies, not in need of improvement because only outstanding and, later, good schools were allowed to convert.
The Treasury kindly stepped in with an extra £200 million though the full amount was not actually required. The overspend is expected to continue: in 2012-13: £400 million has been transferred to the Programme, including £100 million from lower-than-expected 16-19 participation and a similar amount intended for intervention in underperforming schools. More will need to be found from underspends on other budgets.
Part of this continuing overspend will arise from the decision to protect the LACSEG of academies at 90% of the previous year’s figure. This will happen even though the true LACSEG in many LAs will actually be much smaller in future, now that they have got a better understanding of which lines of expenditure should and should not be included in the Section 251 return.
The calculation of a LACSEG separately for each of the 152 authorities has eventually become intolerable for the EFA and so, from 2013-14, they are proposing to have a national rate for all academies, irrespective of the level of funding available to their LA. This national rate, renamed the Education Services Grant (ESG) will be deducted from the general grant given to LAs for their educational responsibilities. This is going to introduce a new raft of inequities. LAs which receive a low level of grant and have a low level of taxation and so spend relatively little will find themselves out of pocket if they have a large number of academies. A typical example is Cambridgeshire: in 2012-13 Cambridgeshire would have spent £4.895 million on providing education services for its 74,543 pupils if they had all been in maintained schools. This equates to £66 per pupil and so would be the relevant figure for the 13-14 year. However, DfE officials are proposing, at the time of writing, a nationally standardised Education Services Grant figure of £160 per pupil in academies. In Cambridgeshire this will remove £4.6 million from the LA’s general grant as there are currently 29,120 pupils in academies. The effect of this is to remove from the LA far more than they would have spent in relation to pupils in academies (and almost as much as would be spent on all state-funded pupils). Consequently Cambridgeshire County Council will have to make off-setting service reductions and savings to the tune of £2.7 million. This could mean, for example, that they would no longer be able to
- manage the strategic capital programme developing new schools for the growing population in Cambridgeshire…..
- continue to provide home-to-school transport for all the children who are transported to special schools
- provide education welfare services for the remaining maintained schools
Of course, they can’t actually do that because these services are statutory so cuts will have to be made elsewhere in the services provided by the County such as adult social care, road maintenance, libraries and youth services. It would also mean that academies are receiving advantageous funding of an extra £94 per pupil which breaches the DfE commitment to equity referred to earlier in this article
It could therefore be argued that a national rate for the ESG should not be implemented until the full reform of education funding goes ahead in the next Comprehensive Spending Review period. Part of that reform would logically be an independent analysis of what it should cost an LA to provide a standard level of service. For 2013-14, academies should receive the actual ESG appropriate to their LA and not be protected at 90% of their previous rate.
So, it is clear that the government is making the Academies programme its flagship policy. What does this mean for the future? The number of primary schools opting for conversion has been less than expected. This is not surprising: given the size of most primary schools, the financial advantage (see above) is not sufficient to compensate for the extra work, risks and responsibilities. To speed up primary conversion, Mr. Gove is forcing ‘failing’ primaries to convert and be taken over by academy chains or other successful schools which are already academies. This failure rate is under his control as he can set the performance benchmarks and also influence Ofsted to ‘raise the bar’ in its judgements on schools.
Everything we have said so far refers to revenue funding, i.e. what schools need each year to cover running costs. Another controversial area and still shrouded in mystery is the capital programme i.e. investment in building new schools, expanding existing ones or repairing dilapidated buildings. Here again Mr. Give has shown his hand. Having scrapped the over-ambitious Labour programme for the refurbishment of the national school building stock, he is now able to distribute largesse on the basis of bids.
In the Autumn statement from the Chancellor, delivered in December 2012, it was announced that Mr. Gove will be given an extra £1 billion which he intends to spend on free schools and academies, particularly to expand popular schools to meet parental demand. The difficulty here is that the country is facing tremendous pressure on school places in the Early Years and primary phases over the next few years. If Free schools are allowed to develop, as they have been so far, on the basis of promoter enthusiasm irrespective of the need for places in a particular area, that could fail to meet the basic demand for school places.
The expansion of good schools to meet popular demand seems obvious, especially to those who see schooling as a marketable commodity rather than a basic right. If successful academies are allowed to expand to meet demographic growth, that might make sense. If they are simply allowed to expand without demographic growth, that means that less successful schools will shrink. As a school gets smaller, it has less financial capacity to meet the needs of its pupils. Experience suggests that it is the highly motivated parent of able pupils who will exercise choice to get their children into the best schools. That will leave the shrinking less successful schools with a higher proportion of less motivated pupils and they will find it increasingly difficult to meet their needs. So the best will get stronger and the worse will get weaker.
The National Audit Office report and the implications arising from the Academies Programme may seem to some to be a rather esoteric and technical matter. In practice, they reveal starkly the dilemma facing educationists and politicians – do we treat education as way of redressing the imbalance between the haves and have-nots by putting equity at the top of our agenda, or do we treat it as a marketable commodity by making choice, diversity and freedom our watchwords? I think we know where Mr. Gove stands!
Peter Downes was the Head of one of the first six schools in the country to pilot ‘Local Financial Management’ in 1982. He edited an account of this in Local Financial Management in Schools, Basil Blackwell, 1988.
This pilot scheme in Cambridgeshire eventually led to the 1988 Education Reform Act and the national implementation of Local Management of Schools (LMS). As an active member of the Secondary Heads Association (SHA), [now the Association of School and College Leaders (ASCL)], and its President in 1994-95, he campaigned for a fairer funding distribution mechanism and commissioned a study on this from the London School of Economics (‘A Better Cake’, 1995).
From 1996 – 2002 Peter Downes was the Funding Consultant for SHA and wrote and lectured widely on this topic, producing Fairer Funding, SHA, January 2000
and Moving Forward with School Funding, Croner Publications, March 2000.
From 2001-2002 he served on the DES Education Funding Strategy Group. In 2004 he co-authored Formula funding of schools, decentralisation and corruption, UNESCO.
Since 2001 he has been aCountyCouncillor in Cambridgeshire and has taken a special interest in education funding and local authority services. He is Vice-President of the Liberal Democrat Education Association and a substitute member of the Local Government Association CYP Board. He writes in a personal capacity.