Education Jun 18 2010

How much extra money will academies really get?

By Guy Dixon 4 comments

There is currently considerable confusion in relation to the funding that schools that become academies under the current bill before parliament will receive compared to what they currently receive. This confusion seems partly the result of comparisons with what happened when the Conservatives were last in power and Grant-Maintained schools were considerably advantaged both in terms of revenue funding (funding for day to day running of a school) and capital funding (major building repairs and additions).

At the moment there is complete opaqueness in relation to capital funding therefore this article restricts itself to revenue funding.

The legal framework for the funding of state maintained schools in England is currently quite different from when GM schools were in existence. This framework dates from 1st April 2006. Its current rules are mostly to be found in the School Finance (England) Regulations 2008 which apply to the 3 financial years beginning 1st April 2008. They have been slightly amended by School Finance (England) (Amendment) Regulations 2010 to take into account the funding of school sixth forms by the new Young People’s Learning Agency.

In essence the framework divides the education budget of an LA into two legally quite separate budgets – an LEA Budget and a Schools Budget.

The Schools Budget is financed by a ring-fenced Dedicated Schools Grant (DSG) that comes from central government. This can be added to by an LA from its own resources, but does not have to be and usually is not. The DSG is for the funding of almost everything related to the education of pupils. With certain exceptions to be found in Schedule 2 of the 2008 Regulations, the whole of the Dedicated Schools Grant must be delegated to schools in an accordance with a formula agreed locally after consultation with schools, but within certain rules and subject to approval by the Secretary of State. These exceptions can be divided into areas where it is practicable to delegate to schools (eg expenditure in relation to the provision of school meals, the repair and maintenance of school kitchens), and expenditure that where it is not practicable. This latter includes the funding of Statemented pupils in residential accommodation outside the LA, Education Otherwise than at School, and Pupil Referral Units. It also includes the funding of nursery provision by both maintained schools and private and voluntary providers – although the last government was intending to make this also subject to delegation by formula.

The LEA budget is part of a Local Authority’s Children’s Services Budget. What it can be spent on is to be found in Schedule 1 of the 2008 Regulations. Some of this relates to further and adult education, the youth service and Connexions, but most relate wholly or mainly to schools and are grouped under the headings, Special Educational Provision, School Improvement, Access to Education and Strategic Management.

Special Education Provision includes the cost of statutory Special Education Needs assessments, the processes involved in issuing statements of Special Needs and expenditure on educational psychologists. It does not include the funding that any statement might allocate to a pupil – that comes from the Schools Budget.

School Improvement covers ‘Expenditure incurred by a local education authority in respect of action to support the improvement of standards in the authority’s schools’ and relates to such matters as monitoring and challenging schools’ educational performance, support for schools causing concern and for turning round schools that OFSTED has issued with a Notice to Improve or put in Special Measures.

Access to Education includes the planning and managing the supply of school places (the LA has a statutory duty to ensure there are sufficient places to meet demand), the provision of clothing grants and home to school transport, the funding of the Education Welfare Service and fulfilling  local authority duties in relation to excluded pupils including advice to their parents.

Strategic management covers many headings but includes the exceptionally important responsibilities of the monitoring and auditing of school budgets and ensuring that schools comply with the requirements of health and safety legislation (in regard to the latter in the case of community and voluntary controlled schools the local authority as employer of school staff is legally responsible for most breaches of the law).

The funding for the LEA Budget comes mainly from two grants from central government – a general grant towards all local authority services and an Education and Children’s Services Area-Based Grant. In addition there is funding from national non-domestic rates and from the local authority’s council tax. Not all the components of the Area-Based Grant relate to schools, but some do eg funding for School Improvement Partners, School Intervention and start up funding for Extended Schools, nor is any component  ring-fenced except they cannot be spent for purposes other than those specified in the Area-Based Grant.

Complicating this is a separate funding stream from central government – the School Standards Fund. For most of its components including the Schools Standards Grant and the Schools Standards Grant (Personalisation), the local authority is simply a passporting office in that all the funding is ring-fenced for schools with the criteria for what each receives being laid down by central government. For some components the local authority can retain some funding centrally. Thus for the Ethnic Minority Achievement Grant local authorities may retain up to a maximum of 15% of their allocation or £150,000, whichever is the greater, to deliver central services and direct pupil support. Exceptionally a local authority can retain 100% of the funding for music services.

What does all the above mean in relation to an academy school? Currently an academy receives a General Annual Grant (CAG) direct from the Secretary of State. This has two components – the formula funding and Schools Standards Funding it would receive were it maintained by the local authority where it is situated,  plus an additional Local Authority Central Spend Equivalent Grant (LACSEG). This is for services which a local authority would usually provide to maintained schools but which it is not responsible for providing for academies

The components of LACSEG under the last government are to be found in

Annexe 1 of the Academy Principals Handbook (to be found on and could  be correlated with the LACSEG Academy Recoupment Calculator (to be found on

which local authorities were required to fill in if there was an academy in their area.

These components have now been added to by the current government (see ) to include two new elements: a) the costs of a local authority’s statutory/regulatory duties and b) the LA’s  Asset management costs.

What this means is that the LACSEG ‘is not a uniform figure across the country. It varies between local authorities and will reflect the amount the local authority already holds back to pay for central services’. In an LA where there is already the maximum delegation possible of the Dedicated Schools Grant and where some elements of the School Standards Fund that can be retained by the local authority have been devolved to schools, the additional funding will be much less than in LAs where (with the consent of the School’s Forum) more funding has been kept centrally. However whether there has been maximum delegation of the Dedicated Schools Grant or not most if not all the additional funding an academy receives will need to be spent on purchasing services that are  no longer provided free by the local authority (eg Behaviour Support, Education Welfare Officers, the auditing of accounts.) by buying them either from the local authority or from elsewhere. In addition an academy will apparently have to support a weaker (presumably non-academy) school. How the expenditure this will involve will be funded is currently unknown.

One mistake some schools thinking of becoming a academy make is to assume that the sum they might get from a share of their costs of theirLA’s  statutory/regulatory duties and Asset management (however it might be calculated) will be a constant one.

But of course it won’t be. For as LAs make cuts in these budget areas as a result of the government squeeze on public expenditure the sum an academy will get under these headings will decrease accordingly.

Interestingly these particular cuts will not affect the budgets of LA maintained schools. This is because as I note here their budgets come not from the LA but from a ring-fenced Dedicated Schools Grant (DSG) which  comes from central government.

4 Responses to “How much extra money will academies really get?”

  1. Mark says:

    Fiona, Could I kindly whether you will be attending the Wakefield discussion on Academies. Many of your appearances do appear to be mainly in London. Many Academies as you are no doubt aware are outside London. It would be great if you could attend.

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  4. Fiona says:

    When is the meeting and what is being planned for Wakefield? Fiona

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