In spring 2003 the government was faced with the allegation by schools and councils that there was a major funding crisis for schools. Ministers, in turn, were concerned that councils may not have passed on to schools ('passported') the full funding increases in what they felt was a good settlement for councils. In response to the dispute, the Secretary of State announced measures designed to bring stability to schools' funding for 2004/05 and 2005/06 and to achieve earlier notification of budgets to schools.
This study, undertaken following consultation under Section 33 of the Audit Commission Act 1998, has addressed two key questions:
- To what extent will the changes in the arrangements for funding compulsory education in councils and schools for 2004/05 and 2005/06 announced by the Secretary of State address the problems experienced at the beginning of the 2003/04 financial year?
- What practical steps can councils and schools take, or are they taking, to plan and manage finances better under the new arrangements?
This report arises from a study undertaken before the publication on 8 July 2004 of the government's Five Year Strategy for Children and Learners, embracing a further announcement about future funding arrangements for schools. However, its main conclusions are unaffected by that announcement. Although the pledge of greater stability for school budgets over a three-year period is welcome, the new measures do not address all the concerns expressed in our report. Nor do they detract from the crucially important role that councils have in relation to schools funding and financial management, covering 24 billion of public funds annually.