School funding changes: made simple

The way in which the Dedicated Schools Grant, one of the main components of school funding, is calculated is changing. The Department for Education says that, for the first time in a decade, funding will be based on pupil characteristics rather than historic levels of spending. With additional guidance recently brought out on this, Schools Week takes a look at what the changes mean.

As we have seen in previous weeks, the Dedicated Schools Grant (DSG) is paid to local authorities for both maintained schools and academies in their areas. (Around 10 per cent of academies – “non-recoupment academies” – have to date been funded differently, but from 2015/16 will be brought into this process).

This week we will look at how funding is allocated locally to schools in an area.


Each local authority has a schools forum — a group on which there are representatives from both maintained schools and academies in the area.

Following consultation with the schools forum, the local authority produces a local formula based on 14 variables which determine how schools are funded locally (graph D).


The 14 factors which can be brought into the formula are set out in the table. Of these, two factors must be used – a basic age-weighted pupil amount, and a deprivation amount. The DfE also require that 80 per cent of the “schools block” part of the Dedicated School Grant is allocated to so-called “pupil-led” factors, as opposed to “institutional factors”. This remains unchanged from 2014/15.

Changes in 2015/16

In 2015/16, the only significant change to the criteria that can be used to set a local funding formula is to the sparsity factor.

Currently, if this factor is used in a local formula it is based on pupils’ average distance from the next closest school, together with the total number of pupils in the school they attend. In 2015/16, this part of the formula will change to being based on pupils’ average distance and the average size of school year groups.

From next year, an additional £50,000 of sparsity funding will also be available for individual very small secondary schools “in exceptional circumstances”, the Department for Education says – and only with the agreement of the Education Secretary.

As in 2014/15, mainstream schools in 2015/16 will also benefit from a minimum funding guarantee (MFG), by which broadly the “schools block” part of DSG funding received by a school cannot be reduced by more than 1.5 per cent. (Certain parts of funding set in the local formula are excluded from this protection, such as any sparsity payment.)

This has to be taken into account by local authorities when they set local funding formulae.

The bottom line

Once the local formula has been set, with all factors taken into account, we are near the endpoint of the process – the amount of “schools block” Dedicated Schools Grant funding due to each school.

For a maintained school, the local funding formula determines how much they will be paid by the local authority.

For an academy, the amount due under the local funding formula is recouped from the local authority by the Education Funding Agency (with a recoupment adjustment factored in). Based on this amount, the academy is then funded direct by the EFA.


f40 Chair, Councillor Ivan Ould (pictured), chair of the f40 campaign for fairer funding in education, which represents 34 local authorities said:

“The coalition government is the first administration in the past 20 years to acknowledge that the existing funding formula is unfair and inequitable, so we are pleased that it has now acted to start to rectify the situation.


“However, the methodology proposed for 2015/16 produces some obvious anomalies, with children and schools in many low-funded authority areas receiving little or no benefit.

“It remains the view of f40 that fair funding will only be achieved by introducing a formula-based approach covering the whole of dedicated schools grant ie,mainstream schools, early years and high needs.

“The introduction of a minimum funding level based only on the mainstream schools funding still leaves a funding system that is neither transparent nor fair.”

“f40 wants to secure a firm commitment that a fair national funding formula and a clear timeline – three to five years – will be fully delivered in 2016-17, whichever party is in government. f40 has always acknowledged that rectifying the root funding inequity will be politically difficult, but the first step in the right direction has now been taken.”





 Philip Nye is a former auditor at the National Audit Office

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