Sarah Healey, Director of Education Funding Group at the Department for Education, has written on 10 October 2012 to all Directors of Children's Services to provide clarification and reassurance about the school funding arrangements in 2013-14. The letter confirms that the Department will review these arrangements and will make further changes in 2014-15 if it finds that the long-term consequences for schools are unacceptable.

The letter also confirms that the Minimum Funding Guarantee (MFG) will continue to apply at -1.5 per cent per pupil in 2013-14 and 2014-15. To address the concerns that some schools and authorities have raised about a potential 'cliff-edge' in funding from 2014-15, the letter gives reassurance that an MFG will continue beyond 2014-15. As this falls in the next spending review period, we are unable to confirm the value of that MFG.

The Department hopes that this letter provides local authorities, schools, teachers and governors with reassurance that the reform to the school funding system will be introduced very carefully and, as the Secretary of State promised in March, at a pace which is manageable.

Reform of the school revenue funding system

The Secretary of State has announced the final details of the reform of the school revenue funding system. This confirms the arrangements to simplify the local funding system for 2013-14 and the new approach to high needs funding that will help to improve transparency, quality and choice for young people and their families. These new arrangements will help to secure greater consistency and equivalence in how funding is distributed to schools and will move us towards a pupil-driven funding system which promotes choice and raises quality.

This is supported by a document School Funding Reform: Arrangements for 2013-14 which sets out the decisions taken in light of the responses we had to our March document School Funding Reform: Next steps towards a fairer system. So, further to our announcement in March, we are confirming arrangements for 2013-14.

Some of the main changes are that:

  • We will not set a minimum threshold for the basic entitlement or pupil-led funding for the first year. We are, however, clear that most funding should be pupil-led and so we will review this once we have reviewed local authorities’ formulae for 2013-14, with a view to setting a threshold for 2014-15.
  • We have also reviewed the income deprivation affecting children index (IDACI)  banding proposal and produced new bands which we believe provides both simplicity and sensitivity. Local authorities will now be able to use six IDACI bands, rather than five.
  • We consulted on where, within a range of £100,000 to £150,000, we should set a maximum cap for the lump sum. In order to give local authorities maximum flexibility in this first year, we are setting the cap, above this range, at £200,000. We believe that this is sufficient to cover the fixed costs of a small school. That is the purpose of the lump sum. It is not intended to lock in existing funding and historic decisions. So, in some cases, schools may need to consider operating more efficiently and, as we set out in March, this could include federating, merging or joining an academy chain.
  • We have also given further consideration to arrangements for supporting pupil growth. Our March document set out a position which would require maintained schools to give some money back to local authorities in order to enable them to support pupil growth. On reflection, we do not believe that this position is in the best interest of pupils or effective place-planning. So we are allowing local authorities to retain some funding for pupil-growth, but to ensure that the funding is then distributed fairly to both academies and maintained schools.

We are also issuing a revised version of the operational guidance which gives detailed guidance to local authorities on how the funding system will operate. Both documents can be downloaded from this page. If you have any queries, please email us at the contact address on this page.

Contact details

Reform team funding
Email: reformteam.funding@education.gsi.gov.uk