PAPER C

EDUCATION, COMMUNITY DEVELOPMENT AND LIFELONG LEARNING SELECT COMMITTEE - 9 FEBRUARY 2004

EDUCATION FINANCE 2004-5 (UPDATE)

REPORT OF THE STRATEGIC DIRECTOR OF EDUCATION AND COMMUNITY DEVELOPMENT

REASON FOR SELECT COMMITTEE CONSIDERATION

This is the annual opportunity for the Select Committee to scrutinise the proposed budget for Education and to assess the impact on the service areas within the Committee’s terms of reference. Proposals are made for savings of £567,800 necessary to comply with the 2004-5 Cash Limit of £68,754,000.

ACTION REQUIRED BY THE SELECT COMMITTEE

1. The Committee is asked to scrutinise the elements that comprise the Education Budget and to question for clarification and/or for the reasoning behind the data provided .

2. To form a view on the recommendations

BACKGROUND

The Select Committee at their meeting of the 15 December 2003 considered an Interim report on the 2004-05 revenue budget for the Education Service. At this time, a number of ‘key’ budget decisions had yet to be taken with regards to the Council’s budget as a whole. These are outlined on a separate paper for members’ consideration.

In addition, further advice was still awaited from the DFES on Spending Targets and ancillary sources of finance such as the Standards Fund. Much of this information is now available and is contained within this report.

SCOPE

There are a number of Key Issues concerning the Education Budget for 2004-2005. The current position with regards to these is a follows:

Education Funding 2004 – 2005
Ref:	Issue	Current position
1	Passporting - Schools Budget 2004-2005 - £60,631,000.	Agreed by the Authority’s Executive at the meeting held on the 17^th December. DFES subsequently informed within the prescribed time scale and acknowledgement received.
2	ISB 2004 –2005 - £50,873,087	Remains unchanged. Sufficient to deliver Minimum Guarantee requirement + some ‘headroom’ provision.
3	Minimum Guarantee EXCLUSIONS for SEN and Average Salary protection.	Application made to the DFES for consideration at the request of the Schools Forum. Initial indications suggest approval for salary protection inequities but no further concession for SEN
4	Notification of Individual Schools Budgets	Dependent upon ‘trouble free’ PLASC submission and the overall Budget Settlement for the Authority.

Ref:	Issue	Current Position
5	Standards Fund 2004-2005	DFES informed of the Authority’s INTENT to take up its full Standards Fund allocation for 2004-2005 – see paragraph 3. This has subsequently been acknowledged by the DFES.
6	CASH LIMIT 2004-2005	Further consideration required. See Paragraph 2.
7	SAVINGS School Block and LEA Block.	Combined savings of £667,800 subject to amendment. See Paragraph 3.
8	Schools Transitional Support Plans (TSP) 2004-2005	TSP and application for supplementary funding of £734,000 submitted to the DFES within the prescribed timescale. The DFES have acknowledged the Authority’s submission and are to deliberate on its content. Final approval by 31^st January necessary if an implementation date of the 1^st April 2004 is to be secured.
9	TSP 2004-2005 LEA ‘Headroom’ supplement considerations	See Paragraph 4.

A summary of the above considerations is given at Appendix One to this report.

2. CASH LIMIT 2004-2005

The provisional Cash Limit for 2004 – 2005 is £68,654,000. The methodology by which this was derived is set out in Paper C of the report presented to the School’s Forum at the meeting held on the 2^nd December 2003 and subsequently the Education, Community Development and Lifelong Learning Select Committee of the 15^th December 2003.

Aggregated Budget Plans for 2004-2005 at estimated ‘Outturn prices’ would require funding of £69,321,800. This exceeded the sum available by £667,800. In formulating the overall 2004-2005 Budget settlement, discussions are taking place to ascertain the feasibility of supplementing the Cash limit by £100,000 as a contribution towards the excess cost of School Transport in 2004-2005 and the statutory requirement to appoint a Health & Safety Officer to oversee Schools and allied services. If this supplement is available, the ‘savings’ requirement will reduce by an equivalent sum and become £567,800.

3. Combined Savings Target 2004 – 2005 = £567,800

Details of ‘exceptional’ spending pressures are set out in the report to the Schools Forum on the 2^nd December and the subsequent report to the Education, Community Development and Lifelong Learning Select Committee of the 15^th December 2003. The savings requirement of £362,800+ within the LEA Block alone has been exasperated by the EFSS methodology for 2004-2005 which provides for a maximum increase of 2.07% ONLY within this block.

Proposals for offsetting the Savings requirement of £567,800 are as follows:

PROPOSED SAVINGS 2004-2005
Ref	Proposed Saving	Implications	£
1	S.E.N. Mainland Placements	Discussion with S.E.N. Senior Managers has resulted in a rescheduling of Mainland placements for 2004-2005. In large part, scheduled placements can now be contained within the Original Estimate for 2004-2005 as adjusted for inflation. See Note (A) below.	£225,000 cr
Ref	Proposed Saving	Implications	£
2	‘PEG’ Pay and Price Provision for ALL Services OTHER THAN Schools at 2.5%	This will impact upon ALL Services other than schools equally. Senior Managers will be required to adjust budgets ‘IN YEAR’ if indicative spending levels suggest overspending.	£86,500 cr
3	Contingency for Pupil Numbers	Full Year effect of September 2003 aggregate pupil numbers and Part Year Effect of anticipated September 2004 pupil numbers. In both instances, Contingency provision was in excess of the sum required.	£24,900 cr
4	Provision of Meals	Reassessment of ‘Free School Meals’ entitlement would SUGGEST either a smaller number of pupils are entitled to a free meal and/or fewer pupils are taking up this entitlement.	£50,000 cr
5	Response to OFSTED report as provided for within the LEA Block	Implementation date delayed until the 1^st September 2004 and not 1^st April 2004 as planned.	£33,400cr
TOTAL SAVINGS :			£419,800 cr
6	‘RATION’ School Cluster Budgets 2004 - 2005	Such a proposal would curtail and possibly abort school development proposals aimed at raising achievement and standards as provided for in the Authority’s EDP – See Note (B) below.	£148,000 cr
TOTAL SAVINGS REQUIREMENT 2004-2005			£567,800 cr

Note A – S.E.N. Mainland Placements

Both the high cost and volatility of Mainland Placements will from time to time adversely impact upon available budget provision. New monitoring arrangements have recently been introduced which will facilitate the identification of spending in excess of budget at the earliest opportunity. These new monitoring arrangements and the critical review which has recently taken place with Senior S.E.N. colleagues suggests that spending within 2004-2005 can be contained within the Original estimate for that year as adjusted for pay and price increases.

However, the uncertainty of demand together with the complexity of ongoing and future SEN Tribunals can result in unavoidable increases in expenditure at very short notice. In order to be better placed to address such demands, it is suggested that an ‘Earmarked Reserve’ be created over time to offset such costs. Future consideration will be given to any underspending in the current 2003-2004 Financial Year in order to fund an initial contribution to such a Reserve.

Note B – School Cluster Budgets 2004 – 2005

The requirement to reduce the size of the 2004-2005 Cluster Budget by £148,000 is ‘in lieu’ of any other budget savings which may be identified as a consequence of discussions with Senior Managers within the Directorate. Further consideration needs to be given to the following:

1. The FINAL Standards Fund Contribution that is dependent upon notification of the complete Standards Fund programme for 2004-2005. Allied to this is the consideration as to whether we ‘take up’ the full Standards Fund programme for the year. The letter sent to the DFES in December identified our INTENT to take up the full programme. The need to make Budget Cuts may make this impossible.

2. A review of Non-Statutory services such as the Youth Service, Outdoor Activity Centres such as Branstone Farm, some aspects of the Music Service etc. Realistically and in fairness to Service Managers of these and similar services, it may be more appropriate to ask the Schools Forum to give consideration to such a review in order to provide options for the 2005-2006 Budget round when resources are unlikely to be any more generous than those available in 2004-2005.

3. Any proposals to reduce NET Expenditure by increasing the level of income generated by some services. For instance, charges for a number of Youth facilities, the income derived from charges for 16+ travel from Home to School and Home to college transport etc. Again this may be a task best undertaken by the Schools Forum.

4. Maximisation of Government Grants and the extent to which costs currently funded through the Directorate’s revenue budget could be financed from external sources of finance. The Authority continues to ‘attract’ grant and ‘one off’ funding for a number of initiatives.

It is `proposed that as and when additional ‘In Year’ savings are identified these are utilised to make good the reduction in the 2004-2005 Cluster Budget. In addition, it is suggested that an application be made to the Director of Finance requesting that any underspending of the 2003-2004 Cluster Budget be carried forward into 2004-2005 in order to maintain the ‘critical mass’ necessary in that year if the curtailment or abandonment of educational initiatives are to be avoided.

4. The use of LEA funding as a ‘Top Up’ for Transitional Support of schools

On the 10^th December 2003, the DFES wrote to all Local Authorities concerning the above. The following extract is an indication of DFES thinking on the utilisation of any LEA Headroom identified as part of the School Budget deliberations:

“In his 29 October statement on school funding, the Secretary of State made clear his expectation that LEAs will do all they can to support schools from their own resources. As well as passporting in full the increase in SFSS, and delivering the required minimum funding guarantee, this also means making the best use of the headroom between the SFSS increase and the guarantee. Ministers believe that targeting schools in financial difficulty should be regarded as the first call on the headroom.”

Authorities are required as part of their Transitional Support Plan (TSP) submissions to make clear what ‘Top Up’ they are proposing to the Transitional Support Grant in order to target such resources to those schools experiencing the greatest financial difficulty. The expectation is that LEA supplements will be required before TSP plans are approved.

For this Authority, a ‘modicum’ of Headroom has been identified. Such funding is unlikely to exceed £240,000 and may be less. Although only modest this would provide the means of financing in part the additional costs over and above the 3.4% identified as inescapable when formulating the Minimum Guarantee proposals. Prominent amongst these additional costs will be the obligation to re-grade support staff in schools. Paradoxically, IF such ‘headroom’ was ONLY available to those schools experiencing the greatest financial difficulty, some schools could find themselves falling into deficit merely as a consequence of this proposal. In addition, distribution of funding via existing formula factors is by no means clear.

To facilitate both an equitable distribution of Headroom funding to all schools whilst at the same time identifying a minimum LEA ‘Top Up’ to Transitional Funding to be made available to those schools in greatest financial difficulty it is suggested that:

‘An application be made to the Director of Finance to approve any unspent LEA Schools Contingency in 2003-2004 to be Carried Forward to 2004-2005 in order to provide a supplement to Transitional Funding in that year’.

Initial considerations would suggest that a sum of £92,000 could be earmarked for this purpose. The draft TSP submitted to the DFES suggests a figure of not less than £80,000.

RELEVANT PLANS, POLICIES, STRATEGIES AND PERFORMANCE INDICATORS

The Education Budget is fundamental to all Education Plans and Policies. It supports in particular Corporate Objective 3 and contributes to Corporate Objectives 1 and 4. All Education BVPIs are influenced by the Education Budget.

CONSULTATION PROCESS

The appendices have been discussed in detail with the Schools Forum. A meeting for all Headteachers and Chairs of Governors is to take place at the Minghella Theatre on 9 February.

FINANCIAL, LEGAL, CRIME AND DISORDER IMPLICATIONS

These budget outlines will form part of the Council’s data when considering the overall Council Budget.

The Education Act 2002 gives the Secretary of State the power to determine the minimum passporting figure that the Council must provide for the Schools Budget.

The quality and inclusiveness of Education Services affect levels of crime and disorder.

APPENDICES ATTACHED

Appendix 1 – Final budget settlement for Education Services 2004-5

BACKGROUND PAPERS USED IN THE PREPARATION OF THIS REPORT

None, apart from the appendices, have been used in the preparation of this report

Contact Point : Kim Johnson, Assistant Director, Head of Planning and Resources, Education and Community Development Directorate

Telephone : 823410 e-mail: [email protected]

DAVID PETTITT

Strategic Director of Education and Community Development

EDUCATION FUNDING – FINAL SETTLEMENT 2004-2005 Appendix One

Ref	Details			£	£	£	Notes
1	Increase in EFSS 2004-05 over 2003-2004					£3,040,090	Cash Limit increased by an equivalent sum to the EFSS increase + £100,000
2	Increase in (INCLUSIVE) Cash Limit 2004-05 over 2003-04					£3,140,090
Inflation, Demographic & other unavoidable cost increases 2004-2005
Inflation		Schools including 2.5% Teachers Pay award			1,748,300
		Schools Block OTHER THAN Schools			306,800		See item B Page 2
		LEA Block			257,000		See Item B Page 2
						2,312,100
Salary Increments		Schools			287,700
		Schools Block other than Schools			26,800
		LEA Block			22,400
						336,900
Pension Increase		Schools			62,000
		Schools Block other than Schools			42,600
		LEA Block			35,700
						140,300
Increase in Pupil Numbers		FYE September 2003			52,600
		PYE September 2004			21,100
						73,700	See Item C Page 2
Service Specific		‘Headroom’ being the difference between the Total Increase in the ISB and cost pressures identified above	Schools			415,290
		Mainland residential placements	School Block		228,300		See Item A Page 2
		Early Years ‘Outreach’			75,000
						303,300
		Residual costs Schools Transport and Health & Safety Officer	LEA Block		13,800
		Implementation of Corporate policies (Stress Counselling) and frictional wider consultation costs			16,500
		Directorate Restructuring and OFSTED Action Plan			96,000		See Item E page 2
						126,300
3		Inflation, Demographic & other unavoidable cost increases 2004-2005				£3,707,890
SAVINGS REQUIREMENT 2004-2005 :
4	Cash Limit 2004-05 as per 2 above				£3,140,090
5	INCLUSIVE Cost pressures 2004-05 as per 3 above				£3,707,890
8	SAVINGS Requirement 2004-2005 – see Page 2					£567,800
PROPOSED SAVINGS 2004-2005 :
A	S.E.N. Mainland Placements – rationalisation of placements 2004-2005				225,000 cr
B	PEG ‘ALL’ Pay and price increases to 2.5% OTHER THAN Schools				86,500 cr
C	Contingency for Pupil Numbers Revision				24,900 cr
D	Provision for Free School Meals – revised ‘take up’.				50,000 cr
E	Delay OfSTED and Directorate restructuring proposals until September 2004.				33,400 cr
						419,800 cr
F	‘RATION’ School Cluster budgets in 2004-2005					148,000 cr
G	TOTAL SAVINGS 2004 – 2005 :					£567,800 cr

28^th January 2004