DSG Budget Overview for 2021/22

1. Recommendations

1.1 AGREE: The transfer of £484k funding from the Schools Block to the High Needs Block in 2021/22.

1.2 NOTE: The funding announced so far for 2021/22 and the requirements for completing the 2021/22 budget.

2. Background

2.1 School Funding is received through the Dedicated Schools Grant (DSG), and is split into four blocks, each with its own formula to calculate the funding to be distributed to each local authority.

  • Schools Block – funds mainstream primary and secondary schools through the school formula, and growth funding for new growing schools/bulge classes.
  • High Needs Block – funds places in special schools, resource units and alternative provision, and top up funding for pupils with EHCPs in all settings including nonmaintained, independent, and further education colleges.
  • Early Years Block – funds nursery schools, nursery classes in mainstream schools, and early year’s settings in the private, voluntary and independent (PVI) sector through the free entitlement for 2, 3 & 4 year olds.
  • Central Schools Services Block – funds services provided by the local authority centrally for all schools, such as the admissions service.

2.2 The Government announced the school funding arrangements for the schools, high needs and central blocks in late July. The extra funding for 2021/22 originally announced in September 2019 by the Secretary of State for Education as part of a three year settlement was confirmed and ratified in the recent Government Spending Review. Arrangements for the early years block are usually announced mid-November but have been delayed until after the Spending Review. This is now expected by mid-December.

2.3 The DSG must be deployed in accordance with the conditions of grant and the latest School and Early Years Finance (England) Regulations. Detailed guidance is contained within various operational guidance documents issued by the Education Funding & Skills Agency (EFSA).

2.4 Transfers of funding between blocks are allowed, but a transfer out of the schools’ block must be consulted with all schools and agreed by the Schools’ Forum.

2.5 This report provides an update on the funding expected for 2021/22, sets out the request to transfer funding from the schools’ block to the high needs block, and summarises what is required in order to set the budget for 2021/22.

3. Funding Announced for 2021/22 3.1.

Appendix 1 sets out the DSG funding Reading received for each block in 2020/21 and compares to the current information on allocations for 2021/22. The units of funding for the schools, high needs and central blocks have been confirmed for 2021/22, but the actual funding will be based mainly on the October 2020 census to be confirmed by the DfE in mid December. The table therefore shows the funding allocations if there were the same number of pupils. In each block the funding rate will also increase for the teachers’ pay and pension 17 grants which have now been added to the DSG and will no longer be paid as a separate grant. For the purpose of showing the growth on a like for like basis, the grant amounts have been deducted at the bottom of each block to show a revised total excluding grants in each block.

3.2. Schools’ block funding excluding grants is increasing by just over £3m or 3.2% overall. The implementation of the National Funding Formula (NFF) for mainstream schools will continue in 2021/22, though there is no confirmation when final implementation will take place; funding will continue to be distributed to local authorities using Primary Units of Funding (PUFs) and Secondary Units of Funding (SUFs), based on the previous year’s data. The local authority in consultation with the Schools’ Forum and all schools will then determine the local funding formula. In 2020/21 Reading is virtually mirroring the NFF, and it is hoped this can be repeated in 2021/22.

3.3. The Growth funding DSG allocation will be on the same formula basis as last year. Using draft October census data, it is estimated that the allocation will go down by £0.5m to £0.845m. However, this funding plus the carry forward from the current year will meet our growth fund requirements.

3.4. The Central Schools Services block funding rate will increase by 3.8% for on-going responsibilities, but with a maximum reduction of 2.5% and maximum gain of 6.45% (i.e. reflecting decreases/increases in overall pupil numbers on which this allocation is based). An amount for the teachers’ pension grant for central teachers will be added when the final allocation is published in December and will be relevant to each individual local authority. Funding for the historical commitments’ element is being phased out and will reduce by a further 20% in 2021/22 (the first 20% reduction was in 2020/21) with no protection on this element. Therefore, savings will again need to be found in this block.

3.5. There will be no change to the High Needs funding formula, and the additional funding in 2021/22 for high needs will be allocated through this formula. Under this formula, Reading currently loses funding, and are therefore on the funding floor, however every local authority will have a minimum increase of at least 8% per head of age 2 to 19 population based on their 2020/21 allocation, and there is a gains cap of 12% for local authorities gaining funding through the formula; this is to help manage cost pressures in this area.

3.6. This will deliver an additional £1.9m to the high needs block assuming similar population numbers, the same increase as in the current year. This will again be very helpful in meeting the costs of our current provision, the growing numbers, and reducing the deficit in this block.

3.7. There has been no announcement yet for early years, but the Spending Review at the end of November announced that there would be an additional £44m available for increasing the hourly rate for 2, 3 & 4 year olds. This is £22m lower than the current year increase of £66m so the increase in the hourly rate is likely to be around 5p. It is not yet known what census data this funding will be based on – bearing in mind that January 2021 is likely to be lower than normal. The maintained nursery school lump sum will continue at least until the end of this academic year.

3.8. As mentioned above, the teachers’ pay and pension grants for primary and secondary schools have now been incorporated into the school’s formula. The equivalent grant for Special schools, AP providers and nursery schools/classes will be added to the relevant DSG blocks, and LAs will distribute the grant to these settings. No announcements have been made yet on other grants, such as pupil premium.

4. Request to Transfer Funding from the Schools’ Block to the High Needs Block

4.1. A transfer of funding from the Schools Block to the High Needs Block is subject to a maximum of 0.5% of the total schools’ block allocation (excluding the amount added for grants in 2021/22) with Schools’ Forum approval and following a consultation with all schools. The maximum transfer permissible in 2021/22 totals £484k; the current amount being transferred is £350k and specifically funds the inclusion fund – additional funding for schools with a disproportionate number of pupils with EHCPs.

4.2. All schools have been consulted on the continuation of this fund and the transfer of funding to support this. The consultation document sent to schools is in Appendix 2. 39% of mainstream schools responded (16 primary, 3 secondary) plus a special school and PRU. The responses are summarised in the table.

Table: Responses to Consultation

Do you agree to transferring funding from the schools block to the high needs block in order to provide additional funding to schools with a high percentage of EHCPs?

Options:
PrimarySecondaryOther (special/PRU)Total%
Option 1: I agree to the transfer of funding in 2021/22 from the schools’ block to the high needs block in order to provide additional funding to schools with a high percentage of EHCPs at the same level/criteria as in 2020/21: transfer of £350k 321628%
Option 2: I agree to the transfer of funding in 2021/22 from the schools’ block to the high needs block in order to provide additional funding to schools with a high percentage of EHCPs at an increased level of funding: transfer of £484k. 12111467%
Option 3: I do not agree to transfer any funding from the schools’ block to the high needs block and schools with a high percentage of EHCPs will not be financially supported in 2021/22 by this method. 10015%
163221

4.3 Most schools responding have preferred option 2 and transferring the higher amount. It is therefore recommended that £484k is transferred in 2021/22. If this is agreed, a report will be brought back to the Schools’ Forum in the Summer Term recommending amendments to the percentage criteria used to allocate the funding.

5. Summary of Requirements to Set the Budget for 2021/22

5.1 Appendix 3 sets out the timetable for setting the 2021/22 budget. Schools Block

5.2. Other reports on this agenda detail the setting of the school funding formula (following the consultation with all schools) and the setting of the growth fund budget and criteria. The budget will be set according to the outcomes of these reports and the final agreement by the Council on the school formula. High Needs Block 19

5.3. The additional high needs funding will be approximately £2m. There is the expectation from the ESFA that local authorities whose high needs block is in deficit will continue to work towards reducing the deficit. This needs to be considered when setting the budget. The current forecast is that the deficit will increase by the end of this financial year. A key element of the strategy to reduce the deficit is to increase local provision and this will result in an increase in costs as new places are opened but will mitigate costs in the long term by saving on more expensive out of county placements.

5.4. The place numbers review has identified some settings where the number of places can be increased, and this cost will be built into next year’s budget alongside additional place funding for the new resources being developed.

5.5. Top up funding makes up the greatest proportion of expenditure in this block (at around 85%). The budget will be based on the current actual average cost of each type of placement (as at February 2021) with an average inflation rate added and an annual increase in number of placements according to current trends. An assumption may also be made on how the top up banding review will impact on the budget.

5.6. Other budgets in this block will be reviewed on a line by line basis.

5.7. The impact on the deficit recovery plan will be reviewed, and the plan refreshed with the 2021/22 budget and future year forecasts. It is likely that a significant part of the additional £2m will be required for increases in both numbers of top ups and inflationary increases to top up fees including the financial impact of what is decided from the review on top up bandings.

5.8. There is no confirmation yet that the funding promised in year three (2022/23) of the 2019 funding announcement will be forthcoming, but the same level of increase as a minimum, needs to continue in order to provide the support needed for our children and young people with additional needs, and to eventually pay off the deficit. The Government is continuing to pursue a cross-departmental review of the SEND system to see what further improvements are necessary to ensure it supports children and young people with SEND as effectively as possible.

5.9. Note that the DSG regulations changed in 2020 and the deficit is now totally separate from local authority funding and reserves. This means that the deficit must not be funded by the local authority’s general reserves and that DSG deficits will over time be recovered from DSG income.

5.10. Further information on the high needs budget setting will be brought to the Schools’ Forum in January and March. Early Years Block

5.11. The percentage increase to the early year’s block is likely to be minimal compared to the schools and high needs blocks. We intend to pass on the increase received to providers by increasing the provider funding rates. It is possible that most of the contingency will be used up this financial year due to the impact of Covid-19, so part of the increase may need to be set aside to ensure a reasonable contingency.

5.12. The budgets for the early years block cannot be determined until the funding arrangements for 2021/22 are published and the draft January 2021 census data is available – if this is the census which will determine the funding for next year. Details on the proposed early years budget will therefore be brought to the Schools’ Forum in March. Central School Services Block

5.13. The intention is to balance the central school services block, which means that savings will need to be made due to the reduction in funding. The reduction relates to historical commitments; these budgets are contributions towards service costs, so will result in these services either having to fund the reduction from elsewhere or reduce the level of service where it can.

5.14. Details on these budgets will be brought to the Schools’ Forum in January.

6. Appendices

Appendix 1 – DSG Allocations 2020/21 and 2021/22

Schools Block (SB)

2020/21 actual spending2020/21 funding2021/22 spend estimate2021/22 fundingYear on year changeNotes
Primary Unit of Funding (PUF)£4,172£4,501+£329 Confirmed (£180 for grants)
Primary Pupil numbers & funding £13,096.50£54,644 £13,096.50 £58,943 +£4,299 (+7.87%) Will be based on Oct 20 census
Secondary Unit of Funding (SUF) £5,504 £5,924 +£420 Confirmed (£265 for grants)
Secondary Pupil numbers & funding £6,952.50£38,264 £ 6952.50 +£2,926 (+7.65%) Will be based on Oct 20 census
Premises £1,283 +£116 (+9.04%) Confirmed
TOTAL SB excl. Growth £94,191 +£7,341 (+7.79%)
Growth Funding Factor £1,345 -£500 (-37.17%)Estimate
TOTAL SB £95,536 +£6,841 (+7.16%)
TOTAL SB excl. Grants & growth fund £94,191 +£3,012 (+3.20%)

Central School Services Block (CSSB)

2020/21 actual spending 2020/21 funding 2021/22 spend estimate 2021/22 funding Year on year change Notes
Unit of Funding £33.61£35.78£2.17 Not yet added grants
Pupil Numbers £20,049£674£20,049£717+£43 (+6.38%) Will be based on Oct 20 census
Historic Commitments £544£435-£109 (-20%) Planned reduction by ESFA
TOTAL CSSB £1,218£1,152-£66 (-5.42%)

High Needs Block (HNB)

2020/21 actual spending 2020/21 funding 2021/22 spend estimate 2021/22 funding Year on year change Notes
Formula£22,778 £24,688 +£1.91 (+8.39%) Confirmed
Hospital and AP pay grants £197£300+£103 (+52.28%)Confirmed (£87k for grants)
Place Funding Unit of Funding £4,213 £4,909£696 (all for grants)Confirmed
Place Numbers £322£1,357£322£1,580+£223 (+16.43%) Will be based on Oct 20 census
Import/Export Adjustment -£1,938 -£1,938 Based on Oct 20 census & Jan 21 ILR
Total HNB £22,394£24,630+£2,236 (+9.98%)
Total HNB excluding grants £22,394 £24,320+£1,926 (+8.60%)

Early Years Block (EYB)

2020/21 actual spending 2020/21 funding Notes
3 & 4 Year Old Funding Rate £5.22
3 & 4 year olds numbers & funding £3,786£11,265 To be based on Jan 21 & Jan 22 census
2 Year Old Funding Rate £5.82
2 Year old numbers & funding £351.7£1,167 To be based on Jan 21 & Jan 22 census
Pupil Premium £103 To be based on Jan 21 & Jan 22 census
Disabled Access Fund £37
Maintained Nursey Grant £260
Total EYB £12,832
Total EYB excluding grants £12,832

Total for all blocks = £131,980

Appendix 2 – Consultation Document on Transfer of Funding

Consultation on the Transfer of Funding from the Schools Block to the High Needs Block in 2021/22 2

1 Introduction

1.1 Funding for schools is met from the Dedicated Schools Grant (DSG), which is split into four funding blocks – schools, central school services, high needs, and early years. The schools block provides the funding for the primary and secondary school funding formula. Transfers of funding are allowed between blocks but transfers out of the schools’ block are limited to 0.5% (excluding the additional amount added for the teachers’ pay and pension grants), require all schools to be consulted, and need the agreement of Schools’ Forum. This decision is for one year only.

1.2 Transfers from the schools’ block to the high needs block have taken place every year, and the amounts transferred each year since Schools’ Forum approval has been required are as follows:

  • 2018/19 – £434,000
  • 2019/20 – £447,000
  • 2020/21 – £350,000

1.3 This paper sets out the reasons why a transfer of funds from the schools’ block to the high needs block is requested for 2021/22.

2. Proposal

2.1 The High Needs Block of the DSG funds places in special schools, resource units and alternative provision, and top up funding for pupils with EHCPs in all settings. Due to historic under funding in this block (funding not keeping up with the increase in numbers/levels/costs of pupils with EHCPs) this block is in deficit. The local authority is required to have in place a deficit recovery plan, and this is shared with the Schools’ Forum with updates provided at each meeting in the budget monitoring report . Reports can be viewed on the Schools’ Forum Webpage. Officers met with the DfE in June 2020 to review the plan, and they were satisfied with the strategy and progress made to date.

2.2 In 2020/21 funding in this block increased by £1.9m (9.5%) and a similar increase is due for 2021/22. This increase alongside the strategies in place to keep increases in costs down is largely keeping in year costs below in year funding and slowly reducing the deficit.

2.3 Schools have played their part in keeping increases in costs down as the top up rates for pupils with EHCPs have not increased for several years. Due to the increase in funding in this block in 2020/21, these rates have been increased from September 2020 and a banding review is currently being carried out with likely further increases from next year.

2.4 Due to the overall continuing growing numbers of pupils with EHCPs and the lack of local specialist places to keep up with this demand, many mainstream schools have seen an increase in their EHCPs over the last few years. The top up funding covers the costs greater than £6k and this funding follows the pupil. But where schools have a high percentage of pupils with an EHCP compared to the average, the demand on their budget is greater. This is because the first £6k of costs need to be met from their budget yet the school formula does not recognise the number of pupils with high needs. The proxy factors of deprivation and low prior attainment do not necessarily capture all the pupil’s requiring additional support, and these factors are irrelevant if the school is on the minimum per pupil funding level or minimum funding guarantee.

2.5 In order to address this funding shortfall in some schools, since September 2018, we have been paying schools additional funding from the high needs block to pay the first £6k where a school’s percentage of pupils with EHCPs is above the local authority statistical neighbour average. Unlike top up funding, this is not a statutory requirement, and is supporting spend which should come from a school’s individual budget.

2.6 In order to fund this, schools agreed in 2020/21 to transfer the funding from the schools’ block to the high needs block. This non statutory cost therefore does not impact on the high needs block deficit. We are consulting on whether to continue with this arrangement in 2021/22 and to top slice funding from the schools’ block funding allocation to pay for this.

2.7 This transfer can either be £350k to cover costs using the current criteria, or the maximum permitted of £484k, which would increase the funding to existing beneficiaries and allow more schools to benefit from this funding (by moving to a lower percentage above which schools would receive additional funding).

2.8 Annex 1 shows an illustrative impact of each option per school, using current top up data, the January 2020 census (October 2020 is not yet available) and the 2019 LA statistical neighbour average percentage (2020 is not yet available). Please email claire.white@brighterfuturesforchildren.org to receive a copy of Annex 1.

To allocate out £484k, the percentage could be reduced by 0.28% for each phase. The exemplification shows that 7 additional schools would qualify for additional funding for 24 pupils compared to the current method. Note that this is illustrative only, and actual allocations would be based on the latest census data for each term. This table also shows for information how much the notional SEN budget is within the school formula funding in 2020/21 for each school.

2.9 The proposal in summary:

  • To pool funding (by a top slice of the schools’ block DSG) from all primary and secondary schools, to pay towards the costs incurred by those schools with a higher percentage of EHCPs.
  • If the transfer of funding is not agreed, this arrangement will come to an end in March 2021 (end of Spring term) and these schools will no longer be financially supported. This would possibly have an impact on the level of support these pupils would receive and/or impact on these school’s budgets.
  • Any funding transferred is ringfenced for this specific purpose and will not be used to offset the high needs block deficit. Any underspend will be carried forward to the following year.
  • The decision is for one year only. Future requests are subject to the deficit position on the high needs block and affordability within this block.

Please respond to the consultation by choosing one of these options.

You may also add further comments to be considered by the Schools’ Forum:

Option 1: I agree to the transfer of funding in 2021/22 from the schools’ block to the high needs block in order to provide additional funding to schools with a high percentage of EHCPs at the same level/criteria as in 2020/21: transfer of £350k.

Option 2: I agree to the transfer of funding in 2021/22 from the schools’ block to the high needs block in order to provide additional funding to schools with a high percentage of EHCPs at an increased level of funding: transfer of £484k.

Option 3: I do not agree to transfer any funding from the schools’ block to the high needs block and schools with a high percentage of EHCPs will not be financially supported in 2021/22 by this method.

3. Next Steps

Responses to this consultation need to be returned by email by 16th November 2020. Schools’ Forum will consider the responses when making its final decision at its meeting on 3rd December 2020. 4. Annexes Annex 1 – Options for Funding Schools with High Percentage of Pupils with EHCPs

Appendix 3 – Timetable for Setting 2021/22 Budget

TaskDate
BFfC inform all schools on proposals for 2021/22 school formula, and to consult with all schools on the transfer of funding from the schools block to high needs block Send to schools 20 October 2020. Comments due back by 13 November 2020
BFfC complete High Needs Place Review Submission due to ESFA by 13 November 2020
BFfC review of Top Up bandings September – December 2020
Schools’ Forum recommend school formula for 2021/22, agree growth funding for 2021/22, and decide on transfer of funding from Schools Block to High Needs Block. Schools’ Forum review top up funding proposals 3 December 2020
BFfC work on high needs and central school services budgets December 2020 – January 2021
Final funding allocations received from ESFA for schools, high needs (part), and central services block. Final data received from ESFA for school formula based on October 2020 census. Due from ESFA mid December 2020
BFfC finalise the school formula based on final funding allocation Late December 2020
Schools’ Forum informed on final school formula, decide de-delegations, and decide the central school services budget. Schools’ Forum review first draft of high needs budget in light of funding available/deficit position 14 January 2021
Local Authority agrees school formula for 2021/22 and BFfC submits APT to ESFA Submission Due to ESFA by 21 January 2021
BFfC Inform mainstream maintained schools of their budget shares for 2021/22 By 28 February 2021 (statutory date but in reality by end of January 2021)
BFfC work on final high needs and early years budgets January to end of February 2021
Schools’ Forum review/agree final budgets for high needs and early years 11 March 2021
ESFA confirm to academies their general annual grant (budget shares) for 2021/22 31 March 2021
High Needs place numbers at institution level published by ESFA 31 March 2021