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Tuesday, 6 March, 2001, 14:09 GMT
School funding
UK spending on education as a % of national income
What is the state of the funding of our schools? Do they get enough money?

Education is a matter devolved to the Scottish Parliament and Welsh and Northern Ireland assemblies - and Westminster MPs have little influence over education policy in these parts of the United Kingdom. For more information see our full guide to devolution.


Before the last election, Labour promised to increase the proportion of the national income spent on education.

That promise was renewed recently by the prime minister for the next five years, if Labour wins the election.

Under the Conservative administration of 1992-97 the education spend averaged almost 5% of gross domestic product. In the last Conservative year, 1996-97, it was 4.7%.

Treasury figures put Labour's spending at an average of 4.65% over the four years it has been in power, with 5.03% in 2000-01 and a projected rise to 5.35% in 2003-04.


These are totals - including money for all educational purposes spent by departments other than the Department for Education and Employment (DfEE), including those in Scotland, Wales and Northern Ireland.

Complicating the picture is the relatively buoyant economy - so that a smaller percentage of national income can mean an increase in spending in real terms.

But ministers' hands were tied in the first two years of the New Labour government by another, wider pledge - not to spend more than the Conservatives had intended to over that period.

So there was a gap between Labour's promises of extra money and schools feeling any benefit, and the government ran into accusations of spin over substance.

Extra money - sometimes announced more than once - was often targeted on specific schemes or dependent on schools and education authorities bidding for a share of a finite "pot".


A recent feature of Labour policy has been to give money directly to schools in England - or at least, for schools to spend as they wish.

In practice the money still goes via local education authorities (LEAs), and their role remains central to the arguments about funding.

Labour has put pressure on LEAs in England to delegate 85% of their education budgets to schools by 2001-2 and 90% by 2002-3.

They say they would be prepared to introduce a legal requirement on LEAs if they do not comply.

Currently, schools control 82% of the money spent on schooling. Ten years ago, they controlled less than 5%.

An Audit Commission report expressed concerns about how this money was being managed and concluded that up to 15% of schools had significant weaknesses in financial control.


The Education Secretary, David Blunkett, had told head teachers that he favoured a split between schools' budgets and the money allocated to education authorities for the services they provide, such as transport and providing for special educational needs.

But in its long-delayed green paper on the future of local government Labour said this would reduce local accountability.

Instead it is proposing greater "transparency" in the funding process, so that parents know how much of the money intended for schools is actually passed on to them by the education authorities.

The Local Government Association was delighted.

Teachers' unions said this would perpetuate the funding "muddle" by which similar schools in different parts of the country get widely differing amounts per pupil, which Ofsted has said "remains a cause for concern".

In the comprehensive spending review last summer, Labour announced:

  • An annual increase in education spending in real terms of 5.4%
  • An extra 12bn over the four years to 2004.
  • 540m to go directly to schools in England from April 2001, ranging from 6,000 for smaller primary schools to 70,000 for larger secondary schools.
The Budget in March increased spending on schools across the UK by 1bn over the three years to 2003-04.

Within this, the money going directly to schools in England was raised, by 1,000 for the smallest primaries and 12,000 for the biggest secondaries. They also get more in capital funding.

The Tories' extra 540

The Conservatives believe that their "free schools" policy would rationalise education spending.

They say that if this system had been in place in 1998-99 then each school would on average have had an extra 540 per pupil due to savings from bureaucracy and non-essential LEA services.

This is how they arrived at that figure:

  • Total money intended for schools in 1998-99 - the Local Schools Budget - was 18.783bn.
  • Within the LSB, LEAs spent 3.611bn on their own activities.
  • Statementing for Special Educational Needs (SEN), specialist support for SEN and the Educational Welfare Service would remain LEA responsibilities, so 3.133bn would have been passed directly to schools if free school policies had been in place.
  • The Tories would also pass on to schools the money currently spent through Department for Education grant schemes such as the Standards Fund. In 1999-00 this was 996m.
  • Free schools would therefore have received 3.133bn plus 996m. As there were 7,580,000 pupils in England this worked out at about 540 extra each.

    But there are several other spending implications:

    The Local Government Association argues that funding schools directly could actually cost up to 5bn:

    This would include up to 4.4bn a year (3,000 per primary school pupil and 4,000 per secondary school pupil) to bring all schools up to the level of the best-funded schools.

    Nationalising the funding of education would bring its own administrative costs - which could be up to 300m. (In 1996-7 the running costs of the now-defunct Funding Agency for Schools, excluding actual grants to schools, was 12.5m).


    Many local councils top up education spending from elsewhere in their budget - they spend more than they are required to - by a total of 400m in 1999-2000.

    It is also argued that some schools, especially smaller primary schools, do not have the ability to manage all their own affairs.

    The shadow education secretary, Theresa May, has quoted the example of a group of head teachers in Gloucestershire who have grouped together to buy training for their staff more cheaply than the LEA provides it.

    The Tories' free schools policy envisages a far more streamlined role for LEAs.

    The draft manifesto said: "LEAs will no longer exist in their current form. Local authorities will have a role in providing educational welfare, identifying children who have special educational needs and in discharging their responsibility to provide a school place for every child."

    The manifesto as published is silent on the role of LEAs, although it says: "We will save money currently wasted on government and council bureaucracy, giving this money directly to schools according to the number of pupils."

    They promise to meet Labour's spending commitments.


    The Liberal Democrats say their plans for education will cost almost an extra 3bn per year and they guarantee to fund this "irrespective of short-term economic growth".

    So they would find the money by putting an extra 1p on the basic rate of income tax.

    They would extend charitable status to all schools - not only foundation schools - without affecting total council funding, and maintain the VAT exemption on school fees.

    In their alternative Queens Speech, the Liberal Democrats called for "transparency and efficiency" in education funding.

    They would require spending announcements to meet transparency requirements so that "new" and "old" money, and funding from the National Lottery and other sources, was identified.

    They oppose the use of cumulative spending figures such as Labour's infamous claim to be increasing education spending by 19bn over the first three years of the Parliament.

    They would also limit the use of competitive bidding and set transparency and disclosure rules for private finance initiative projects.

    The Lib Dems want to give schools more control over their budgets but strongly support the maintenance of LEAs.

    Their education spokesman, Phil Willis, has said that "without the crucial interface of local government our education service would quickly become a 'one suit fits all' model, a bulk delivery service where the needs of the consumer are subservient to the expectations and requirements of the government of the day."

    But they say the LEA must also have a key role in promoting local diversity. The local involvement and democratic legitimacy of elected members, the Lib Dems argue, is essential for the creation of strategic vision.


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