4. Fair Funding: Future Approach
The Scottish Government proposes to introduce a new approach to funding for schools which meets the principles set out in Chapter 3, reflects the ambitious reforms set out in Next Steps, and supports improved outcomes for all our young people.
Next Steps sets out specific proposals for reform in order to create an education system that:
- is centred around children and young people;
- is school and teacher-led;
- focusses on the quality of teaching and learning;
- supports leadership; and
has a relentless focus on improvement.
School funding needs to reflect and support the greater devolution of responsibility to headteachers described in that paper.
As set out in Chapter 1, the Scottish Government does not intend to develop a fixed national funding formula.
However, school funding needs to be more transparent and better targeted to need, and to reflect the new, enhanced role of headteachers. This chapter therefore seeks views on two possible approaches to achieving those aims: by enshrining a national approach to the devolution of funding within the new Headteachers' Charter; and/or through increased targeting of elements of funding, building on the Pupil Equity Funding approach.
4.1 Enshrining a national approach to the devolution of funding within the new 'Headteachers' Charter'
Next Steps sets out the Scottish Government's intention to legislate to create a Headteachers' Charter which will be developed in partnership with the profession. The intention is to invest in the leadership of schools and support empowered headteachers to raise attainment and close the attainment gap, within a strong national framework.
- be the leaders of learning in their schools;
- be supported through a revolutionised offer of support and improvement;
- be responsible for raising attainment and closing the poverty-related attainment gap;
- deliver quality and improvement at school level;
- select and manage the teachers and staff in their school;
- decide on school management and staffing structure, including business managers;
- decide on curriculum content and offer;
- work with partners, including local authority support staff and others, to meet learners' additional support needs at school level;
- collaborate for school improvement at school, cluster and regional level;
- lead self-evaluation and improvement of school performance;
- monitor school progress and reporting; and
- manage defined and greater proportions of school funding.
In addition to devolving the maximum amount of funding to schools, the Charter could also provide for a Scotland-wide approach to funding allocation, incorporating within it a standardised approach to school funding.
Building on existing best practice, such an approach could retain flexibility in decision-making to reflect local circumstances, while mandating and bringing consistency and transparency across Scotland to:
- the proportion of funding to be allocated directly to schools;
- the proportion of funding to be allocated to particular areas of spending;
- the way in which funding responsibilities are held and shared between schools, local authorities, regional improvement collaboratives and others;
- the decisions that local authorities take in allocating funding to schools, by bringing consistency to the formulas they use and the factors they take into account in allocating budgets, reflecting need and overarching policy aims;
- the financial role and responsibilities of headteachers; and
- the training and support headteachers can expect to receive from local authorities and regional improvement collaboratives.
As all local authorities are currently obliged to have a Devolved School Management scheme, this approach would be unlikely to require the development of any new bespoke delivery mechanisms, although there may be some administrative impacts in some local authorities if the changes are a significant departure from current practice.
Next Steps makes it clear that we will transform the level of clear, practical support for headteachers at a regional level to ensure they have all of the help and advice they need to improve the curriculum, learning, teaching and assessment. Similarly, substantially increased devolution of funding responsibility would need to be accompanied by increased support to headteachers, for example, a greater role for business managers and potentially new financial procedures. The Scottish Government would ensure that headteachers have the support necessary to enable them to have the skills and confidence to grasp the opportunities that such a change would bring. This approach would potentially also require the development of new accountability mechanisms and some transitional arrangements to ensure smooth transition to a new system.
A thorough process would be undertaken to agree the content of a Scotland-wide approach to devolving funding to headteachers. That would be taken forward by the Scottish Government, in conjunction with teachers and local government partners.
A consistent, national approach to funding through the Headteachers' Charter could achieve a fair and more transparent allocation of resources by ensuring funds are allocated in an optimum and consistent way, based on need, and in accordance with overarching policy aims. It could support more empowered schools, but headteachers would have to have the ability to choose the staffing mix and management structure within their schools, which could have implications for the national pupil teacher ratio. This potential implication for national government is acknowledged in Next Steps. We will discuss with partners, including professional associations and parents, how we develop the right balance between national priorities and local flexibility as we move to a more empowered system.
This approach could provide clarity over the way that local authorities fund schools, by providing for minimum spending levels in certain areas of the budget, based on a formula, and could help to promote greater stability in funding, allowing headteachers to plan for the longer term. It would use a familiar method of doing so as its basis ( DSM), ensuring the retention of flexibility to meet local circumstances.
Such an approach fits well with the Accounts Commission's finding that it is how local authorities decide to spend their education budget that has most impact on attainment levels. A Headteachers' Charter could mandate some elements of spend, based on proven examples of what works.
This approach would promote equity within local authorities by ensuring the funding was allocated on a fair basis, and between authorities, by ensuring minimum spends as a proportion of budget. Without some direction on the amount of funding to be allocated to education, however, it would be difficult to achieve 'horizontal' equity, whereby similar schools in different local authorities receive similar amounts of funding. Care would also have to be taken to ensure that, in ensuring consistency and transparency, headteachers and schools were not constrained or disadvantaged.
(a)What elements of school spending should headteachers be responsible for managing and why?
(b)What elements of school spending should headteachers not be responsible for managing and why?
(c)What elements of school spending are not suitable for inclusion in a standardised, Scotland-wide approach and why?
4.2 Increased targeting of elements of funding, building on the approach taken to Pupil Equity Funding ( PEF)
An alternative approach - or one that could be used in conjunction with the approach set out above - would be to build on the approach currently being taken in relation to Pupil Equity Funding. Under this approach, more funding would be targeted directly to schools in relation to specific need factors known to impact on performance and outcomes.
The current system for funding schools would be largely retained with this approach, but a greater proportion of funding would be allocated in this way, directly to schools, and potentially also school clusters and regional improvement collaboratives, to support particular needs and policy aims. As with the PEF approach, the headteacher would be responsible for decisions on spending, within national guidance, but overall accountability would be likely to remain with the local authority, through which the funding would be directed.
The PEF is currently allocated on the basis of known entitlement to Free School Meals. Under this approach, funding could be allocated on a formulaic basis dependent on the purpose for which it was being provided. It could take into account a wider range of factors aligned with policy goals in addition to deprivation, and could be adapted flexibly to support particular parts of the education system or particular policy aims and priorities.
This approach could build on delivery mechanisms, procedures, principles and evaluation which are already or currently being put in place through the PEF (set out in 2.2.4). However, allocating a larger amount of funding in this way would require a thorough review to: identify various aspects of need and how they are currently met in Scotland; develop and agree methodologies for measuring and distributing funding; develop clear guidance for schools; and to develop and maintain monitoring and accountability measures reflecting governance arrangements. That review would be taken forward by the Scottish Government, in conjunction with teachers and local government partners.
Substantially increased devolution of funding responsibility would need to be accompanied by increased support to headteachers, for example, a greater role for business managers and new financial procedures. Depending on the proportion of funding allocated directly to headteachers, this approach might also require the development of potentially new accountability mechanisms.
Aligning more funding with particular need or policy aims in this way could provide better targeting of resources towards those pupils who are in greatest need, regardless of which local authority they reside in. In this respect, it could do much to address the consequences of apparent variations in the current system and achieve value for money. This approach also aligns well with a Centre for Economic Performance finding that increases in resourcing are usually more effective for disadvantaged pupils and/or schools  .
This approach would also strengthen school and teacher leadership by allowing teachers greater control over resources, and would improve the transparency of a greater proportion of school funding. However, it is considerably more limited in scope than the Headteachers' Charter approach, which would ensure maximum devolution of funding responsibility to headteachers.
(a)What would be the advantages of an approach where the current system of funding schools is largely retained, but with a greater proportion of funding allocated directly to:
2. Clusters; or
3. Regional Improvement Collaboratives?
(b)What would be the disadvantages of an approach where the current system of funding schools is largely retained, but with a greater proportion of funding allocated directly to:
2. Clusters; or
3. Regional Improvement Collaboratives?
The Scottish Government's education governance reforms will empower headteachers to make more decisions about resources at their school. What support will headteachers require to enable them to fulfil these responsibilities effectively?
What factors should be taken into account in devising accountability and reporting measures to support greater responsibility for funding decisions at school level?
Do you have any other comments about fair funding for schools?
Email: Deborah Davies
Phone: 0300 244 4000 – Central Enquiry Unit
The Scottish Government
St Andrew's House