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					                            EDUCATION & CULTURAL SERVICES REVIEW PANEL
                                                          15 January 2003
                                                                 Item no:


                     EDUCATION REVENUE BUDGET 2003/04
                        (Report by Director of Education)


                   This report provides a summary of the proposed
                     2003/04 Education Revenue Budget and the
                    financial issues facing the Service in 2003/04.


1. INTRODUCTION

   Cabinet meeting on 16 December, 2002 considered a report from the Director of
   Finance which outlined details of the Provisional Revenue Support Grant (RSG)
   Settlement for 2003/04.

   The Cabinet agreed a set of proposals from the Chairman of the Cabinet for
   2003/04 which are now the subject of widespread public consultation and political
   review. As part of the process each Review Panel is being asked to consider the
   detail of the proposal as they relate to their Services. This report relates to the
   Education Service proposals.

   The Cabinet will re-consider the proposals in the light of feedback at the 3
   February meeting of Cabinet.

2. THE 2002/03 EDUCATION SERVICE BUDGET POSITION

   The most recent monitoring report to Cabinet showed the 2002/03 budget of
   £371.7m may overspend by £1.075m or 0.29%.

   The major reason for this projected overspend is a £1.64m projected overspend
   on Home to School Transport. Members may recall that a report to Cabinet on
   15 July, 2002 on the Final Accounts 2001/02 showed Home to School Transport
   for that year overspending by £2.825m.

   Cabinet accepted for 2001/02 that the overspend was linked to an underspend on
   the Public Transport budget. The Director of Finance in his report to Cabinet on
   16 December made a similar point about the 2002/03 position in saying “There is
   a link between this and the underspend on Public Transport costs within Planning
   and Transportation and the situation is under continual review by the Director of
   Education. If Home to School transport is overspent at the end of the year and
   there continues to be an underspend on Public Transport, this will no doubt be
   considered by Cabinet when reviewing the possible carry forward of service over
   and under spends.”



Originator: Paul Fisher                                      Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                       Page No:1
Revised: 3 January 2003
   As members of the Review Panel will appreciate I have already found savings
   within the Service to partly offset the Home to School Transport projected
   overspend. I do not believe the service can find significantly more savings and
   offset the full £1.075m current projected overspend.

3. 2003/04 EDUCATION SETTLEMENT

   The 2003/04 Government funding settlement for Education is the most complex
   for a number of years. A new methodology for distributing resources between
   local authorities has been introduced. This significant change has been
   accompanied by the transfer of funding responsibility for a number of spending
   areas that were previously funded by specific grant and other central government
   budgets.

   The actual uplift after transfers of responsibility is 5.6% in cash terms but only
   3.2% in per pupil terms.

   The actual figures and the details of the transfers are:

                                          £m              £m         Notes
   2002/03 original                      319.965
   plus additions for
      - teachers pensions                                 8.056        1
      - class size funding                                3.729        2
      - nursery education grant                           4.661        3
                                                        ______
                                         16.446
                                        _______
       2002/03 adjusted                 336.411
       plus 2003-04 uplift               18.997
                                        _______
       2003/04 provisional              355.408
       Formula Spending Share           _______

       Notes
       1) Teachers pensions – reflects the 4.75% uplift increase in the
          employers contribution to teachers pension scheme as a
          result of a transfer of pension indexation costs to the
          scheme.

       2) Class Size Funding – reflects the transfer of responsibility for
          Key Stage I class size funding which is currently met by
          100% specific grant.

       3) Nursery Education Grant – reflects the transfer of
          responsibility for nursery education grant, which is currently
          100% specific grant funded.


Originator: Paul Fisher                                        Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                         Page No:2
Revised: 3 January 2003
The total increase in funding between 2002/03 original and 2003/04 provisional
figures is £35.443m.

4. UNAVOIDABLE COSTS IN 2003/04

   The Education Service is faced with a number of unavoidable costs resulting from
   the transfer of responsibilities; various inflationary pressures; demographic
   growth; continued pressures on home to school transport budget; expansion of
   early years education and some minor essential growth.

   The details of these items are:

                                                £000          Notes
   Transfers
       Teachers Pensions                        8,056        1
       Class Size Funding                       3,729        2
       Nursery Education Places                 4,661        3

   Inflation
        Pay and price                         11,216         4
        1% National Insurance increase         2,088
        Teachers pensions                        679         5

   Demographic growth                            3,000        6

   Home to School transport                      2,000        7

   Miscellaneous items of growth (net)              36

   Additional Early Years Places                 1,040        8
                                               ______
                                               36,505

       Notes
       4) Inflation – this provision includes 3.5% for pay increases and
          2% for price increases.

       5) Teachers pensions – reflects the additional funding required
          to pay the additional 0.4% increase in teachers pensions
          employer contributions. This is over and above the 4.75%
          increase funded via the base budget transfer.

       6) Demographic growth – reflects current best estimates of the
          cost of funding pupils next year. Actual figures will not be
          known until early February, i.e. after the January pupil count
          date.




Originator: Paul Fisher                                      Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                       Page No:3
Revised: 3 January 2003
       7) Home to School Transport – costs continue to rise above the
          general rate of inflation. Contract relets are resulting in 8%
          to 9% price increases. Pressures on the budget also arise
          from SEN transport needs and the impact of transporting
          pupils when the nearest school is full.

       8) Additional Early Years places – need funding to meet the
          Government entitlement target. Whilst the funding makes
          provision for 85% entitlement, because of funding pressures
          only 77% entitlement is fundable in 2003/04.

5. STANDARDS FUND ISSUES 2003/04

   In addition to the transfer from the Standards Fund of two major categories of
   support, i.e. for class sizes in Key Stage I and nursery education grant, the
   Standards Fund has been further reduced by the removal of other major
   categories of spending. The DfES guidance is that it is for local authorities to
   determine the local priority to spend in these areas and to fund spending from the
   general funding settlement accordingly.

   Six categories of funding in particular have been withdrawn and continued
   funding depends on local funding sources. These are:

       -   School Improvement
       -   School Inclusion – Pupil Support
       -   Performance Management and Threshold Assessment
       -   Induction of Newly Qualified Teachers (NQTs)
       -   Class size Key Stage II
       -   Learning Support Units

   In 2002/03 these Standards Fund allocations represented a significant level of
   investment in schools and the LEA.

                                               Schools      LEA
                                               £000         £000
           School Improvement                   2,700         526
           Social Inclusion – Pupil Support     1,108         700
           Performance Management and
           Threshold Assessment                  396          14
           Newly Qualified Teachers              837          57
           Class size Key Stage II               350           -
           Learning Support Units                192
                                               _____       _____
                                                5,583      1,297




Originator: Paul Fisher                                      Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                       Page No:4
Revised: 3 January 2003
It is proposed that from the above the following three essential items are funded, ie

                                                £000          Note
          Induction of NQTs                      894          9
          School Improvement staff               526          10
          Learning Support Units                 192          11
                                               _____
                                                1,612
                                               _____
       Notes
       9) Funding of NQTs – this is the funding required to replace the
          withdrawn Standards Fund. Newly Qualified Teachers are
          required to be released for periods during their first 12
          months in the classroom. This funding facilitates that
          process. The LEA spending supports a co-ordinated training
          process.

       10) Funding of School Improvement staff – previously funded
           from Standards Fund. The LEA staff currently funded via the
           Standards Fund are essential to ensuring the continued
           improvement of Norfolk Schools and therefore this
           replacement funding is essential.

       11) Funding Learning Support Units – which were created and
           previously funded by the Standards Fund. Non funding of
           these needed and recently created units would be illogical.

Because of the reduction in the Standards Fund the local authority contribution can
be reduced whilst still maximising the uptake of match grant funding. This reduction
will save £1.674m.

6. FUNDING SUMMARY

   In summary therefore essential spending needs compared to available funding
   shows:
                                             £000
   Settlement increase (gross)                35,443
                                             ======

   Funding Needs
      Unavoidable costs                       36,505
      Replacement of grant funding             1,612
      Savings on Standards Fund
         contributions                         -1,674
                                              ______
                                              36,443
                                             ======

Originator: Paul Fisher                                       Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                        Page No:5
Revised: 3 January 2003
This minimum requirement represents £1m more than the central Government
settlement provides.

7. IMPACT ANALYSIS

   An accurate assessment of the impact of the above proposals is not clear until
   detail funding allocations are made in February and information on actual pupil
   numbers and the actual cost of the teachers pay award are known.

   However, based on our current assessment the likely impact includes:

             changes to the Standards Fund are likely to result in school funding
              being reduced by a net £1.5 million. This reduction arises from the
              withdrawal of various grant categories which previously provided
              schools with £5.6 million, off set by £1million replacement funding for
              induction of NQTs and Learning Support Units and an estimated £3.1
              million from new Standards Fund grant categories.

             the funding of the revised Admissions Policy from September 2003
              (£0.93m in a part year) will only be possible by a redistribution of funds
              between schools.

             the Government target of passing on the increase in the Schools
              Funding Share to schools will be achieved.

             the proposed increase in Schools Standard Grant to facilitate the
              reform of the schools workforce is likely to generate over £2m extra for
              Norfolk schools, but this is subject to the completion of the national
              agreement on Raising Standards and Reducing Workloads in schools.

             continued pressure on the Home to School Transport budget which
              suggests a further £0.85m over the proposed budget provision may be
              required in 2003/04.

8. THREE YEAR SCHOOL BUDGETS

   The DfES is urging local authorities to issue three year indicative budgets to
   schools and to help the process has issued its three year funding proposals for
   Education. This encouragement and support is welcomed, as it will result in
   improvement in financial control within schools.

   I will be analysing the impact these proposals may have on Norfolk Education
   Service. However, at individual school level the greatest variation in budgets will
   be caused by variations in pupil numbers. We already require all schools to
   produce two year budgets and encourage schools to produce three year budget
   forecasts.



Originator: Paul Fisher                                        Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                         Page No:6
Revised: 3 January 2003
   I will be providing schools with additional support next year to help them evaluate
   the impact of pupil number variances and will reinforce the need for schools to
   produce three year budget forecasts.

   As part of the process of reviewing the arrangement for Fair Funding in 2004/05, I
   will bring forward proposals to require all schools to produce three year budget
   forecasts. Clearly such a financial discipline will help to improve the standard of
   financial control within schools.

Action Required

The Panel is asked to endorse the 2003/04 budget proposals as set out in this
report and recommend their adoption to Cabinet.


Office Contact:              Paul Fisher
                             tel: 01603 223464
                             email: paul.fisher.edu@norfolk.gov.uk

Background Papers:           Report to Cabinet 16 December from Director of Finance:
                             2003-2004
                             Provisional Revenue Support Grant (RSG) Settlement
                             DfES School and LEA Funding letters


                            If you would like this report in large print, audio, Braille,
                            alternative format or in a different language please
                            Janet Evans
                            Tel: 01603 222377
                            Fax: 01603 222119
                            Email: janet.evans.edu@norfolk.gov.uk




Originator: Paul Fisher                                      Originator’s Ref: PF/CB/1127
Created: 30 December 2002                                                       Page No:7
Revised: 3 January 2003

				
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