Agenda item

Report to be considered jointly with Public Accounts Select Committee

4.1      The order of the agenda was amended to accommodate the joint session. This item was considered first.

4.2      Councillor Hilton opened the meeting and nominated Councillor Sorba as the Chair of the joint session.

4.3      Dave Richards (Group Finance Manager, Children and Young People) introduced the report. The following key points were noted:

·           The main thing that would affect school funding in the coming few years was the proposed introduction of the national fair funding formula by central government.

·           The formula was due to be introduced in April 2018.

·           When proposals for the new formula were introduced, it was anticipated that Lewisham schools would lose a significant amount of funding.

·           The government had previously committed to protecting the worst affected schools by ensuring that no school would lose more than 3% of its annual budget.

·           Under the original proposals every one of Lewisham schools was at the 3% funding floor.

·           Since the policy was announced, the general election had taken place and in their manifestos all parties had committed to providing more funding for schools.

·           The day before the meeting, government ministers had recommitted to introducing the national funding formula in parliament. However, they also said that no school would lose out under the formula.

·           There were currently no additional details about how this amendment to the original funding formula would work in practice, nonetheless, Lewisham schools would likely be in a better position in the next few years than had been anticipated.

·           Schools were also facing significant cost pressures. These pressures had been mounting over the past two years and had risen to nearly 5% of schools’ budgets. Schools’ funding settlements had also been frozen, meaning that schools had faced a real terms loss due to inflationary pressure.

·           Cost pressures, salary and non-pay inflation in the next two to three years would amount to approximately 8% of schools’ budgets.

·           There remained a great deal of uncertainty about the future of school funding. Clarity was not expected on the next steps for the national funding formula until the end of 2017.

4.4      Dave Richards, Sara Williams (Executive Director for Children and Young People) and Kate Bond (Head of Standards and Inclusion) responded to questions from the committees. The following key points were noted:

·           Further detail was awaited on the new proposals for the schools funding formula. It was expected that the majority of any new money would be paid to schools that would have benefitted from the original proposals but that this would be achieved without taking funds from schools that would have lost out.

·           The new system meant there would be much less discretion for local authorities. The original intention for the new formula was that the funding would be provided directly from the Department for Education to Schools.

·           There was a possibility that the figure of the 8% cost pressure could increase if there were changes in government policy. For example, there had recently been discussions about ending the public sector pay freeze.

·           Additional work had been carried out with schools to prepare them for the difficult financial climate in the coming years. As a result, a number of schools had improved their financial management processes, resulting in some underspends.

·           The aggregate school balances held by Lewisham schools had unexpectedly increased in the past year.

·           Schools were facing a very challenging financial climate and a number of schools were overspending on their budgets each year.

·           Schools were liable to pay business rates but they were provided with full funding for rates through their budget. Schools were given an increase in funding to cover the cost of any increased rates.

·           The money to pay for business rates was ‘top sliced’ from the dedicated schools grant before this money was paid to schools. In the previous year, combined business rates for school had increased by £300k to £3.6m.

·           It was recognised that while the quality of new school environments was good, schools with private finance initiative (PFI) buildings had some constraints on the availability of premises for extracurricular activities.

·           The Council had good arrangements to get the best possible deal with PFI operators.

·           The schools forum and the Mayor had agreed to cap the cost of PFI arrangements to 10% of a school’s budget, which was roughly the same as the benchmark for facilities management and maintenance costs in all schools.

·           PFI was a legacy of the school building programme by central government.

·           There were ways in which schools could raise income - but these tended to be for extra activities, rather than a contribution to their core budget.

·           The Department for Education’s forecast that schools could save significant amounts from improved efficiency and procurement was probably optimistic.

·           Schools working together could make savings. In Lewisham there was a well-managed schools catering contract. A number of schools who had left the combined contract had re-joined, alongside some schools from neighbouring boroughs.

·           A review of traded services to schools had been carried out (alongside comparison with the cost for traded services in other boroughs) to ensure they were good value.

·           Work was also carried out with school business managers to encourage them collaborate in order to reduce spending.

·           Schools were also provided with benchmarking information about their non-salary costs to assist with their decision making.

·           There had been significant changes to the funding for early years. In the past different local authorities had had different systems for funding early years. The government had brought in new rules about funding.

·           Under the government’s previous proposals - school based early years provision would have lost significant amounts of funding.

·           However, central government had provided additional funding to protect local authority maintained nursery schools. It was not clear how long this protection would last.

·           Lewisham also provided additional hours of early years education to children from deprived backgrounds. The rules had been changed, which meant that in future, the Council will no longer be able to provide additional hours of support to these children beyond the statutory free offer.

·           The changes to early years funding created additional funding pressure on schools with nursery provision and could be seen to devalue the work of early years education.

·           The Council recommended that schools retained 2/3% of their budget for contingencies.

·           Average salaries for teachers in Lewisham were seventh highest in the country. This was partly because of the inner London weighting. The rest of the top ten highest paying authorities in the country was probably made up of other London boroughs.

4.5    Councillor Maslin (Cabinet Member for Children and Young People) responded to a question from the Committee about support provided to schools:

·           Schools were provided with advice and training to help them better manage their budgets.

·           Schools in deficit were lent money to enable them to manage their budgets in the short term - so that they could better balance their budgets.

4.6      Councillor Maslin also responded to a question from a member of the public about the current financial situation at Forest Hill School:

·           The dispute between the National Union of Teachers and Forest Hill School was a matter for the school and its governors.

·           Schools were funded by central government through the dedicated schools grant.

·           The scheme of delegation for the dedicated schools grant was agreed by the schools forum, which was comprised of head teachers.

·           Forest Hill school had overspent its budget by 10% and was now putting in place plans to manage down its deficit. The current cuts were a result of the requirement for the school to spend within its annual income.

·           Statutory guidance was that schools should pay back loans from the local authority within three years, the Council had extended this to five years.

·           There had been other schools in the same position as Forest Hill School who had taken difficult decisions to control their costs, so equity and transparency were important.

·           Forest Hill School was a popular school and was in a better position to manage its budget than other schools that had been in a similar position but which did not have a full roll of pupils.

·           Lewisham operated a different system to some local authorities regarding the liability for redundancy costs in schools. The approach being taken by the Council with Forest Hill School was consistent with the approach taken to date at other schools in Lewisham.

·           He would be happy to meet with parents and the MP for Lewisham West and Penge. He would not meet with the school, the National Union for Teachers, parents and teachers from Forest Hill School to "broker a deal" because the Council was not in a position to do this.

4.7      RESOLVED: that the report be noted. The Public Accounts Committee also confirmed that it would be scrutinising the issue of private finance initiatives at a future meeting.

4.8       The Public Accounts Committee moved to room three for the remainder of its agenda