PAPER B
EDUCATION, COMMUNITY DEVELOPMENT AND
LIFE LONG LEARNING SELECT COMMITTEE – 28 JANUARY 2003
LOCAL GOVERNMENT FINANCE SETTLEMENT,
BUDGET FOR 2003-04 AND FORWARD PLAN FOR 2004-06
STRATEGIC DIRECTOR FOR FINANCE AND INFORMATION AND
COUNTY TREASURER AND STRATEGIC DIRECTOR FOR EDUCATION AND COMMUNITY DEVELOPMENT
REASON FOR SELECT COMMITTEE CONSIDERATION
This report sets out the draft budget proposals for 2003-04
as considered by the Executive on 15th January 2003. The Committee
have requested the opportunity to consider the budget proposals, in particular
those which will have an impact on the service areas within the Committee’s
terms of reference.
The Committee’s views are invited, particularly in
relation to the possible increases and decreases in expenditure and income set
out in Annex 4 of the County Treasurer’s report to the Council’s Executive and
throughout the body of this report.
On 5 December 2002 the Government’s proposals on the Local
Government Settlement for 2003/04 were announced, and brief information was
circulated to all members on 11th December.
The proposals incorporate a major change to Revenue Support
Grant methodology, which is disadvantageous to a number of authorities,
particularly in the south east area. Generally speaking, councils in the north
and midlands benefit from the new arrangements.
On the 15th January 2003 the Executive received a
position statement as a starting point for discussion. The appendices are attached as an addendum to this
report and comprise the following:
·
An
overview of the grant settlement for 2003/04 for England – Appendix 1
·
A
summary of the national SSA comparisons for 2003/04 with 2002/03 adjusted –
Appendix 2
·
Details
of the proposed settlement for the Isle of Wight showing comparisons with
national trends and a year on year comparison
- Appendix 3
·
As a
basis for discussion the Directors have put forward proposals for a draft
budget which would have the effect of limiting any Council Tax increase to
17.8% if there is full passporting of funds to schools – Appendix A, B and C as
supplemented by Appendix 4 to the County Treasures report.
·
The
Council’s main capital borrowing approvals. These presently show an overall
increase of some 10%. However, contained within that figure is a large increase
for Education and a reduction for Highways
- Appendix 5
·
Public
consultation results - Appendix 6
·
Revised
planning and budget timetable -
Appendix 7.
The Executive agreed that the draft budget be presented to the Co-ordinating Committee for comment and also resolved in principle to recommend to the Council that full passporting to schools should take place.
NATIONAL CHANGES TO EDUCATION FUNDING
The DFES in their letter to all
schools dated 5th December 2002 made clear their intent that the NEW funding system for Education
would ensure that similar pupils in different parts of the Country would
attract similar amounts of funding.
This has resulted in a major grant loss to this Authority as detailed in
the County Treasurer’s report.
In addition to this fundamental
change in determining each Local Authority’s share of grant entitlement, there
are THREE other major changes to the Funding of Education in 2003-04 namely:
o
The separation of schools and LEA funding blocks
o
The transfer of some specific grants into ‘mainstream’
funding
o
Above Inflation increases in respect of both Teachers and
Non-Teaching staff pensions together with a significant uplift in employers
national insurance contributions
Each of
these changes is outlined below.
The Education SSA has been replaced by the Education Formula Spending Share (EFSS). The EFSS is made up of two separate blocks:
-
The Schools FSS
-
The LEA FSS
The Schools FSS covers school’s
delegated budgets in addition to that expenditure incurred by the LEA in
support of individual pupils through a range of SEN services. Early Years provision is also part of the
Schools FSS. The LEA FSS provides for
those services other than in school i.e. the Youth & Community Service and
the Strategic and Management responsibilities of the Authority in so much as
these relate to Education.
Two major grants have been transferred to the EFSS. These are:
-
Nursery Education Grant
£892,800
-
Class Size Grants Primary schools £319,100
In addition funding has been withdrawn in respect of ‘five’ significant Standards Fund Allocations including School Inclusion and the induction of newly qualified teachers. Funding approximating £650,000 will not be available in 2003-04.
It has now been confirmed that the
Teachers pension rate will increase from 8.35% to 13.5% with effect from the 1st
April 2003 at an additional cost of
£1,488,000. In addition the planned
increase in Non-Teaching staff pension contributions from 10.5% to 12% together
with a 1% increase in Employers National Insurance contributions will cost
in excess of £456,000.
A Standstill budget or put another
way, the budget necessary to MAINTAIN current levels of Service is detailed on Appendix A. In essence this is the current cost of services as provided for
in the Education SSA settlement for the current year 2002-03 UPDATED for the
following:
o
Pay and Price Increases including the above inflation
increases detailed overleaf.
o
Pupil Number changes both within schools and those entitled
to assistance through the Statementing process.
o
Contractual Pay Increments for both Teaching and
Non-Teaching staff.
o
The absorption of costs previously supported through
Government Grant as detailed above
o
Other inescapable cost pressures not provided for in
Education SSA for 2002-03 including a significant increase of £118,000+ for
school transport.
The TOTAL cost of a ‘Standstill’
budget for 2003-04 is £65,977,000. An increase of £6,821,000 or 11.5%
over and above the Education SSA for 2002-03 (£59,156,000).
Appendix B demonstrates
the affordability or otherwise of sustaining a Standstill Budget. The statement consists of four parts
the first three of which relate to current service provision namely:
Part One The Authority’s
Education Formula Spending Share (EFSS) for 2003-04
Part Two The cost of a
‘standstill’ budget as set out on Appendix A.
Part Three Comparison of the
EFSS with a standstill Budget for 2003-04
The notified EFSS for 2003-04 is £64,834,000. Of this, £56,348,000 relates to the
Schools Block and £8,486,000 to the LEA Block. However, the DFES
notification which contained details of the EFSS also set a target for schools
spending termed the ‘Schools Budget’ of £57,155,000 some £807,000
greater than the Schools FSS.
The notified Schools Budget is
considered by the Secretary of State as being the minimum prescribed spending
level for services within the Schools Block.
As such, this has significant funding implications for the Authority
adding some 1.8% extra to the potential Council Tax Levy for 2003-04. Local Authorities are required to notify the
DFES by the 31st January of their proposed School Budget . If this is less than the target set by the
DFES (£57,155,00), the Authority will be asked to give reasons as to why there
is a shortfall.
It should however be noted that
the Secretary of State has a ‘Reserved Power’ to set a minimum level of
a Schools Budget with which the Authority would need to comply. This would arise where the Secretary of
State took issue with the size of the Schools budget set by an LEA. Where this
applies, authorities could expect to receive a notification from the Secretary
of State within 14 days of submitting their spending proposals and would be
given a further 14 days to raise objections as to why such a prescribed budget
would be unacceptable if they so chose.
Part Three of Appendix B compares the EFSS settlement for 2003-04 as supplemented by the additional spending requirement to satisfy minimum DFES School Budget exhortation with a Standstill Budget for that year as detailed below:
o
For the Schools Block the cost of a Standstill budget
EXCEEDS the supplemented Schools FSS by some £1,107,000
o
For the LEA block the converse applies with a Standstill
budget being some £771,000 LESS THAN the notified LEA FSS
o
A Standstill budget for ALL services is some £336,000
IN EXCESS of the supplemented EFSS for 2003-04
Discussions
with the Local Implementation Division of the DFES have indicated that it would
be permissible for the LEA to utilise the £770,00 excess within the LEA Block
to underwrite standstill costs in the Schools block. However, it should be noted that such a proposal will result in
a curtailment of further expansion of services within the LEA block for the
foreseeable future. In addition, there
would be little capacity to address further shrinkage in funding within this
block in future years.
The above
comparison also makes clear that even at an enhanced level of funding necessary
to secure the DFES School Budget
target, it will not be possible to sustain a Standstill budget in its
entirety. Subsequent reports to this
Committee and the Schools Forum will set out the options available to offset
the £336,000 savings required to remain within the planned budget for 2003-04
which has yet to be approved by the Council.
Appendix C lists the
Service pressures likely to impact upon the Committee in 2003-04 and
beyond. In the knowledge that a
Standstill budget is already some £336,000 in excess of predicted funding
levels, it is clear that none of the service pressures listed can be addressed
without identifying spending economies elsewhere within the Committee’s budget.
In some instances, such proposals will either have to be abandoned or postponed or accommodated through Service Management review. However, there are some costs which can not be contained through such an approach namely within Early Years and SEN services. Failure to address such requirements could result in either the Authority being in breach of a Statutory Duty or the non achievement of spending targets set out in recently adopted service plans such as the ‘Isle of Wight Early Years Development and Childcare Implementation plan for 2003-04’.
Once
again, subsequent reports to this Committee and the Schools Forum will set out
the options available to substitute spending on existing services in
order to accommodate the most pressing service developments.
Part Four
of Appendix B INCLUDES the cost of the service pressures identified in Appendix
C. This would increase total spending
on the Education Budget to some £67,943,000 this being £2,302,000 more than supplemented
EFSS necessary to satisfy minimum DFES requirements for the Schools Budget.
In announcing the settlement, the Government has indicated to LEAs the importance they attach to the Youth Service and the role that it has to play in making a major contribution to promoting social inclusion and assisting young people at risk. Within the LEA FSS is a ‘sub-block’ for the Youth Service slightly in excess of £1,154,000. Comparative spending on Youth and Community services for this Authority for 2003-04 is estimated at slightly more than £1,377,000 although it should be noted that this includes the cost of the West Wight ‘Call In’ centre, music provision other than at school and the Llanbrynmair centre for outdoor pursuits.
Whilst further expansion of LEA provision is unlikely in next year, the full utilisation of funding obtainable through the Connexions Service should provide at the least the opportunity to consider innovative service development.
Sixth Form Funding
The funding of School sixth forms is derived through the Learning and Skills Council (LSC) rather than the LEA. Funding allocations for 2003-04 have recently been announced by the LSC and first indications would suggest that these are not generous. High School colleagues have been alerted to this lack of generosity in order that spending plans for 2003-04 reflect what for some schools will be a reduction in ‘real terms’ funding. This will necessitate either the identification of new sources of funding or expenditure contraction in order not to exceed the budget available to them.
Direct School Grants
In addition to the LEA delegated budget, schools receive a ‘direct’ Standards Grant from the DFES. The size of the grant depends upon the size and phase of the school. For this Authority Middle Schools are deemed Secondary for grant purposes. The proposed grants for 2003-04 together with the comparative grants for the current financial year are shown in the table overleaf. The percentage increase in Standards Grant is significant. For example, the School Standards Grant for a modest size primary school of 300 pupils will increase from £24,700 to £30,000; an increase of £5,300 or 21.5%. However, in Cash terms an increase of £5,300 is unlikely to facilitate more than a modicum of service improvement and is far more likely to be utilised in underwriting school budgets which at best will provide for a continuation of current service levels.
|
Phase |
Pupil Numbers |
Grant 2002-03 £ |
Grant 2003-04 £ |
|
Primary |
Up to 100 101 – 200 201-400 401-600 |
7,200 13,900 24,700 30,900 |
9,000 18,000 30,000 40,000 |
|
Secondary |
Up to 600 601-1200 1201-1800 1801-2400 |
59,600 72,000 84,300 84,300 |
75,000 90,000 105,000 120,000 |
|
Special |
Up to 100 Over 100 |
20,600 28,800 |
25,000 35,000 |
The above grant rates have now been confirmed by the DFES. Payment at these higher rates was conditional upon a commitment from unions and employers to a restructured teaching profession and a restructured school work force. Indications are that agreement has now been reached with unions and NEOST although the National Union of Teachers (NUT) have raised concerns about the future role of Classroom Assistants.
Target Setting 2003-04
A letter was sent direct to ALL schools by the Secretary of State in early December providing an explanation of the New Funding system for Education. The letter also made reference to a proposed increase in pupil funding of some 3.2% for this Authority or a Cash equivalent of 4.8% after allowing for pupil number adjustments.
It formulating a Schools Standstill budget for 2003-04 it is evident that a ‘cash’ increase of 4.8% would be totally inadequate to fund the additional costs that schools will be incurring as a result of above inflation increases in both employers pension and national insurance contributions in addition to the net increase in pupil numbers and contractual pay increments. Appendix D quantifies the additional costs that schools will need to absorb next year in order to maintain current levels of service provision. The average increase for all schools is in excess of 8.54% with the largest increase being in Primary schools as a result of the discontinuation of Class Size grants.
SCHOOLS FORUM
Previous reports to this Committee have outlined the purpose and functions of the new statutory body required by the Education Act 2002 and termed the ‘Schools Forum’. In essence, the Forum will undertake three main functions:
o Consultation on the Authority’s funding formulae for schools
o Deliberations on the size, location and content of the Schools Budget
o ‘Buy Back’ arrangements between the Authority and schools.
As indicated elsewhere in this report, the Forum will need to be consulted on both the options available in order to identify offsetting savings of £336,000 to remain within predicted spending levels and the contraction of existing service provision necessary to accommodate at least the most pressing service developments.
CONSULTATION WITH
SCHOOLS
The report of the County Treasurer to the Council’s Executive of the 15th January made clear the very real dilemma facing the Authority with regards to setting an affordable Council Tax levy whilst at the same time preserving wherever possible current levels of service provision.
At the time of writing this report, no decision has yet been taken as to the increase in Council Tax in next year and the level of services this implies. In response to the DFES requirements to set a Schools Budget for 2003-04, early indications would suggest that the Authority would wish to express it’s intent to set a school budget equivalent to the target sum of £57,155,000.
A meeting with Head Teachers and Chair of Governors has been set for early March in order to discuss the implications of the above report not only for schools but also those services which support them.
A summary of the
results of the Autumn consultation process with members of the public on budget
priorities is included as Appendix 6 to the County Treasurers report. In addition, planned consultations with
Unions and the Island Chamber of Commerce have yet to take place.
FUTURE FUNDING LEVELS
To an extent, the settlement for 2003-04 allows for some service protection through minimising the loss of grant to the Authority in Year One of the new grant system. However, whilst an undertaking has (for the moment) been given to perpetuate these arrangements for spending within the schools Block, no such undertaking has as yet been made for spending within the LEA Block.
Moreover, the Secretary of State has indicated that funding will be withdrawn in respect of Standards Fund activities over the next two years which may or may not be added to subsequent years EFSS. Such uncertainties as to future levels of funding will necessitate a far ranging review of service provision over the next nine months in order to be better placed to absorb further funding reductions and address additional service pressures in future years.
COMMUNITY AND DEVELOPMENT SERVICES
Both cost and service pressures on Community and Development services are acute. Funding constriction will inevitably result in service redefinition. Appendix 4 to the County Treasurer’s report of the 15th January includes a number of proposals which if adopted would result in service reduction.
The Committee’s views are invited on these proposals.
The services
included within this report are linked to a number of the Council’s key strategic
objectives and plans, and in particular those detailed in the Isle of Wight
Council Corporate Plan 2002-2005, the Education and Community Development
Strategic Plan (Improving Island Life) 2001-2004 and the Education Development
Plan 2002-2007.
There will be implications for future performance measures
and indicators arising from any change in funding availability as determined by
the factors outlined in the County Treasurer’s report to the Executive. This will impact both on cost based factors and
service provision measures.
Further consideration is to be given as to how the CPA
recommendation to progress the integration of corporate, service and financial
planning can be brought about. This
will secure the full implementation of a corporate performance management
system with links to both service and financial monitoring.
FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS
Financial implications for this Committee are myriad as indicated in the body of this report
together with Appendices A, B & C and
Annex 4 of the County Treasurer’s report.
It should be noted that there is a statutory requirement for
the Council to set its Council Tax for next year by no later than 11 March
2003.
There are no direct crime and disorder implications arising
from the production of this report.
Contact Point : A. King F 823658
BACKGROUND PAPERS
Council publication ‘Budget 2002-03’
Executive Committee report of 15th January 2003 -
‘Local Government Finance Settlement And Budget 2003-04’
David Pettitt John Pulsford
Strategic Director Education and Strategic Director for Finance and Information
Community Development and County Treasurer