News analysis Browns maths fails to convince examiners

14 Dec 06
No sooner had Chancellor Gordon Brown finished adding up his promised £36bn investment in education over the next four years than the economists were asking the inevitable question: 'How much of that is new?'

15 December 2006

No sooner had Chancellor Gordon Brown finished adding up his promised £36bn investment in education over the next four years than the economists were asking the inevitable question: 'How much of that is new?'

The answer, according to Luke Sibieta of the Institute for Fiscal Studies is: 'Not very much.'

The capital investment for the English education system will come in annual chunks, rising from £8.3bn in 2007/08 to £10.2bn in 2010/11.

Most of that had already been announced in March's Budget and only £100m a year – destined for colleges and universities – is new.

According to the IFS's analysis, real-terms growth in capital investment in schools will drop from the 16.3% per year it has enjoyed since 1997 to 4.9% between 2007/08 and 2010/11.

Growth in non-school education investment, meanwhile, will slow from 14.5% to 2% per year.

Out of that diminishing pot, the government is already committed to opening 3,500 children's centres by 2010, rebuilding or refurbishing more than half of England's estimated 14,000 primary schools and providing all secondary schools with 'twenty-first century facilities' by 2012.

More interesting, perhaps, is how the chancellor framed his recycled announcement: as an 'early Comprehensive Spending Review 2007 settlement for education capital'.

Given his other early settlements – most notably a manifesto commitment to increase overseas aid by almost 11% – analysts at the IFS think his room for manoeuvre on education revenue over the CSR 2007 period as a whole is 'tight'.

The figure includes expenditure for teachers, books and equipment – plus the extended schools initiative aimed at tackling inequalities.

According to IFS deputy director Carl Emmerson, Brown must now choose between one of two scenarios, both of which pitch health and education against each other in a scramble for scarce funds.

Under the first, Brown continues to be guided by Derek Wanless's 2002 recommendations for minimum health funding and so increases total health spending by 4.4% – down from 7.2% over the previous five years.

That would leave room for just 2% growth in education, down from 4.4% in the previous three years.

A second scenario turns its back on Wanless and further reduces the funding increases channelled into health to just 3.1% growth – less than half that of recent years. Brown would then have scope to award education a maximum 3.8% growth in funding: still a significant reduction compared with previous years.

Neither scenario would provide anywhere near big enough funding increases to achieve Brown's 2006 Budget pledge to bring state school per pupil funding up to private school levels – estimated at £8,000 for day schools in 2005/06, say the IFS.

'To make the pledge meaningful it would have to be achieved in a short timeframe,' says Sibieta, 'but at present rates we don't see it being realised before 2017.'

Instead, the PBR raised school revenue funding by 0.4%, from an initially planned £5,650 per pupil in 2007/08 to £5,670, 'a drop in the ocean' as the IFS put it.

Filling the remaining £2,330 gap between state and private schools will require a further increase of more than 40%, says Sibieta, particularly as the original pledge promised to adjust the £8,000 figure for inflation.

For Martin Rogers, director of the Children's Services Network, growth in capital funding is welcome, but it is revenue spending that really makes the difference between private and state schools.

'In the private sector, the extra money goes into staffing, where the difference is big enough to have a real impact on average class sizes,' he told Public Finance.

'Class sizes are hugely smaller in the independent sector and that's a major issue we'll be looking to see at least partially addressed in the CSR.'

But it's not just how much money is put into education that matters to Rogers. The question of control is also becoming increasingly important, he says.

'I would hope that any additional investment to follow in the CSR would be more focused on meeting the government's priorities and national needs than just giving extra money over to schools,' he says.

There is 'clear evidence' – both anecdotal and in the Audit Commission's recent More than the sum report – that some schools have neglected recent programmes to engage more fully with more deprived sectors of their communities through the 'extended schools' initiative', he adds.

While the majority of school funds are channelled through local authorities, since 2005/06 85% of those are through the Dedicated Schools Grant and must be passed straight to schools.

That drastically reduces the authorities' ability to compel schools to collaborate with the Every Child Matters agenda, says Rogers, who is hoping the CSR will address the issue by increasing the share of funds over which the authorities have discretion.

'Money could still be ring-fenced for schools, but it should be conditional on the schools collaborating on a particular programme, or providing a particular extended service.

'It would be helpful if money was used as an incentive to encourage the positive behaviours that central and local government say they want,' says Rogers.

So far, however, Brown's PBR appeared to offer little signs of that. Instead, the extra £20 per pupil – £130m in all – is to form part of the School Standards Grant.

To the average secondary school the increase will mean £200,000 a year rather than £190,000 in 2007-08 and it is intended to support the personalisation and extended school services that Rogers wants to see more of.

But, like the DSG, the grant is not conditional and is allocated purely on pupil numbers.

In October, Education Secretary Alan Johnson told a social services conference that he would use the CSR to address the issue of unspent school reserves – thought to total £1bn. That cash might be better spent on targeting children's services, directed by local authorities, he said.

But the PBR made no mention of this apparently surplus cash and Department for Education and Skills' officials are thought to be less keen on the idea. If Brown is to achieve his stated ambitions, he will need more than just another drop in the ocean.


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