Could GAG pooling undermine the national funding formula?

It is now five years since DfE introduced the national funding formula for schools (NFF). Its aim was to provide a transparent system to fund schools across the country on a consistent basis, dependent largely on the characteristics of their pupils. It also aimed to address historic inequalities whereby funding related not to pupils attending schools today, but those who had attended years before.

This was a significant change, and the system was protected from an overnight move to a hard (or in the current parlance, direct) NFF that would see someone with a spreadsheet in Sanctuary Buildings set a school’s exact funding. Instead, the NFF determined the overall level of funding that went to a local area, and the amount allocated to individual schools was determined by a local formula. In other words, the NFF provided a starting point for what a school might receive, but the actual amount could differ.

Academy bosses have long campaigned for a move to a direct NFF, arguing that local authorities should have very little (if any) role in influencing their budgets. Now, the DfE wants to move in that direction. A 2021 consultation resulted in further restrictions on how local formulae are constructed and recommended that overall values should nudge ever closer to what would be allocated if DfE did so directly.

But there remains some tension between this desire for transparency and consistency in the funding system, and the move for all schools to be in academy trusts. It is ultimately the trust and not the individual academy that is accountable for how money is spent, and there is no guarantee that an academy will receive the amount determined by the NFF.

This is most evident where individual academies have no budgets at all. The Academy Trust Handbook allows trusts to amalgamate the general annual grant from all its schools to meet the running costs of any of its constituent academies, a process commonly known as GAG pooling. What restrictions are in place are fairly limited: the trust must consider the needs of all academies, and there must be an appeals process.

GAG pooling is a growing feature of the academy system, with one report finding that nearly one-quarter of trusts are now centrally managing funding in this way. But it is not without its critics. It is by definition a redistribution of funding. As such, some academies will likely “lose out” if a trust follows this approach. Centralised control may also be a barrier to some schools joining a trust given concerns about a loss of autonomy, and it means fully sacrificing the delegated responsibility for budgets that has been in place since the late 1980s.

For these reasons, GAG pooling is arguably a bigger change to how schools receive and manage funding than the NFF. But does it go as far as unwinding the progress made under the NFF and take us back to an unfair and opaque system? Well, not quite.

Ultimately, similar pupils in different parts of the country will largely attract the same amount of funding in a way they didn’t use to. The lowest level at which funding is truly consistent is at the trust rather than individual academy level, but it is still a significant step forward from pre-NFF days.

What we lose is the transparency the NFF was supposed to provide. There’s no requirement for trusts to publish how they allocate funding to individual academies. Indeed, some would question whether it’s even possible for MATs that take a “one trust” view that all pupils and staff are part of one organisation rather than individual schools.

But if the argument is that academy trusts are ultimately best placed to determine the level of funding that academies or even groups of pupils need, then there is surely great potential in transparency, and great value for DfE in knowing how and where redistribution occurs.

If the view from the frontline is that the NFF isn’t getting it quite right, then an element of crowd-sourcing could help refine and improve it.

The two elements do not have to be in tension. Call it a self-improving school funding system.