1. The Financial Landscape 6 December 2010 Pat Jones Group Accountant Childrens Services

2. Background to CSR New Government faced with a £156bn fiscal debt; A desire to eliminate the structural deficit by 2015/2016; Commitment to reduce the bulk of the deficit through reductions in spending rather than tax rises; Recognition of the need to transform much of the Governments activity.

3. 2010/2011 – Headline Figures The Council’s approved 2010/2011 gross General Fund Revenue Budget is £386m. Within this there are some spend areas over which the Council has no control:Delegated School Budgets£98 m Benefit Subsidy£58 m Total Council Ongoing Service Gross Expenditure is, therefore, in the order of £230m The gross 2010/2011 revenue budget is further dependant upon other income such as: Specific Grants£49 m Fees/Charges/Generated Income£54 m The net budget requirement of £127m is financed as follows: Formula Grant£54 m Council Tax Yield£73 m

4. Unprecedented “In Year” Grant Reductions Area Based Grant - Education £836k Harnessing Technology Grant £322k Local Delivery Support Grant £ 87k Extended Schools Capital £ 50k Youth Capital Fund £ 38k “Freeze” on the Sure Start Capital Grant £1225k

5. 2010/2011 Funding Council’s Ongoing Service Gross Spend – £230 million Chart sets out reliance on Funding streams by Directorate of the Council (excludes Housing Benefit Payments £58m) Schools Funding as per Section 251 (ISB) – NB. Schools will generate Income in addition to Grant

6. Comprehensive Spending Review (CSR) 20 October 2010 – Local Government Headlines 28% real terms reduction in funding over the Spending Review period BUT; Frontloaded (and following “in year” cuts”); Increased flexibility through: –Rolling a number of specific grants into Formula Grant –Rolling a number of specific grants into DSG –Reducing Grant streams from 90 to 10 –Remove ring-fencing from Grants (excluding DSG and Public Health Grant).

7. Financial Landscape: Local Picture Impact on Schools

8. Financial Landscape Impact on the Schools Budget

9. School budget (5-16s) will increase by 0.1% in real terms each year of the CSR (from £35bn to £39bn by 2015) BUT : This includes £2.5bn of funding for the new Pupil Premium – distributional impact? Funding streams will be amalgamated into a simplified DSG – implications? Potentially reduced funds but Heads will have increased flexibility over their budgets – A tough trade off! Underlying “per pupil funding” will be maintained in cash terms – BUT what does this include? It inevitably means that, taking into account inflation, the amount allocated to each pupil will reduce! Does it also disguise the effect of rising pupil numbers and the introduction of pupil premium? Savings in procurement/back office and pay freeze will free up funding for frontline teaching – i.e. efficiencies to bridge any funding gap; Still further clarification required – 13 December 2010 announcement?

10. Financial Landscape Impact on the Schools Budget The School Participation Age will rise to 18 by 2015. This will be funded by replacing the current Educational Maintenance Allowances with ‘more targeted’ support; BSF no longer an ongoing programme, but £15.8bn of capital funding will be used to rebuild or refurbish 600 schools over the spending review period; Early years education will be boosted by providing 15 hours a week of education and care to all disadvantaged two year olds, and by protecting Sure Start services in cash terms.

11. Financial Landscape Pupil Premium Targeted at the most disadvantaged pupils; Announced by Nick Clegg ahead of the CSR, on 15 October 2010, as part of a wider “fairness premium”, which would “stretch from a child’s first shoes to a young adult’s first suit”; Fairness Premium £7bn over 4 years (i.e. £1.5 - £2.5bn per year); £1.7bn of the £2.5bn comes from other education cuts & £800m from welfare; Consultation is ongoing – but it is likely to mean schools will receive additional funds for every pupil eligible for free school meals; The premium will, by its nature, not be distributed evenly to all schools, so some schools will see their budgets fall; Schools will be free to spend the additional money as they see fit for pupils perceived as most in need, even if this does not exactly match the definition of need used to distribute the premium.

12. Financial Landscape – Redundancy Management Current Policy on Redundancy Funding: Redundancy costs will only be funded by the Local Authority in exceptional circumstances; Limited Central Fund Exists; The LA will determine whether circumstances are exceptional by assessing financial management through the monitoring of budgets (and cash flow returns etc for fully funded schools); The LA would not look favourably on requests to fund redundancies which arise as a result of poor financial management; If a school needs to plan redundancies to take effect in August 2011, then relevant procedures should be instigated through the Human Resources Team by February half term at the latest.

13. Responding to the Challenge: Developing the School’s Budget Early discussions between Headteacher and Governing Body regarding impact of 2011/2012 budget; Through the following processes: - 2010/2011 Forecast Outturn – Deadline 3/12/2010 - 2011/2012 Draft budget – Deadline 17/12/2010 The draft budget developed by the school will highlight financial risks and provide time to devise strategies; The challenge of improving standards with reduced resources

14. Responding to the Challenge: Developing the School’s Budget Budgets should be based on: Base 2011/2012 pupil numbers on autumn term census Inflation factors should not exceed 0.5% SDG, Extended Schools, Specialist Schools Grant, SSG and SSG(P) estimate at 2010/2011 levels (moves into DSG) One-to-One Tuition and National Strategies will continue to be targeted No other grant income except where already confirmed

15. Responding to the Challenge: Developing the School’s Budget Budgets should be based on: Cost of redundancies should be built into budgets (only a small central fund remains for 2010/2011) – Liaise with School Finance Advisers and ensure that their multi year budgets reflect this; Since the LA will not be in a position to provide 2011/2012 final budgets to schools until March 2011, schools need to review budgets now on the basis of current information. Consider impact of census information and, in particular, where pupil numbers are falling; Account for Staff increments and thresholds; Schools will be required to fund the full cost of broadband as Harnessing Technology Grant has ceased

16. Draft Financial Regulations Consultation on Draft Financial Regulations issued by the DfE: Carbon Tax in relation to the Carbon Reduction Commitment Mainstreaming of grants Pooling of budgets for federations

17. Your Role – The Critical Friend Expect monitoring, Forecasts to YE & Narrative Plan ahead - Pupil number movement Revenue run rates and recruitment decisions Use statistics to Challenge the 2011/2012 budgets (i.e. pupil – teacher ratios) Benchmarking (DfE website) VFM & Department allocations (What are the outcomes?) Consider R&M rolling plans and Capital programmes Early discussions between Govs & Headteacher