Independent report provides in-depth analysis of the school funding system in Wales and makes recommendations for improvements

The review was commissioned in October 2019 by Education Minister Kirsty Williams who confirmed leading education economist Luke Sibieta would take forward the analysis.

The Minister commissioned the review to offer analysis and recommendations as to how the school funding system could be adapted to best support policy goals and ambitions to improve the school system in Wales.

Setting up the review was key recommendation of the Senedd’s Children and Young People and Education committee. It was commissioned and mostly undertaken before the Covid-19 outbreak but still acknowledges the pandemic will have ‘profound implications’ for school resources and spending and will lead to ‘massive strains on public finances’.

Education Minister Kirsty Williams said:

“When this work was commissioned in October last year nobody could have known about the unprecedented strain the coronavirus pandemic would have on public sector budgets.

 “I am fully aware of the real pressures that Local Authorities and schools are now facing as a consequence of the pandemic - such challenges make it even more important that a considered review of the school funding system has been undertaken to ensure it is well-placed to assist policymakers as we move forward.  

“The Welsh Government is doing everything it can to ensure Wales’s public services have all the resources they need to respond to, and mitigate the impact of, the crisis. 

“Now, more than ever, we need to understand the funding decisions made across Wales to secure equity and excellence for our learners.

“The publication of this report is therefore very timely as it provides evidence to enable policy makers to make informed decisions when considering funding for schools across Wales, continuing our overall aim of improving school standards and reducing inequalities.”

Breaking down the report

A number of key conclusions emerge from the review on how funding has changed, and how it is distributed across schools and areas:

Spending per learner has fallen by 6% in real-terms

This largely tracks falls in the block grant and has been accompanied by slight rises in class sizes.

There is room and evidence for higher levels of deprivation funding

The most deprived schools see higher levels of spending, but deprivation funding is relatively small outside these highly deprived schools.

There is now strong evidence showing that higher spending has a bigger impact on deprived learners and can be a valuable tool for reducing inequalities.

Similar schools experience different levels of funding  

Schools with similar levels of deprivation often see differences of about £1,500 or 35% in spending per learner.

Large differences in spending across similar areas  

Even after accounting for learner and school characteristics, many local authorities spend up to £300 per learner more or less than the national average.

Expected future cost pressures  

In the short-run, schools costs are likely to grow if policymakers in Wales introduce starting salaries of £30,000 in order to be on a par with England. Demographic change is likely to increase the already high cost of running small schools in rural areas and demand for adult social care is likely to grow significantly, placing pressure on overall local government budgets.

The report then makes a number of recommendations to help address these challenges:

Spending decisions based on empirical evidence  

A strong consensus has now emerged in academic evidence showing large positive effects of school spending, with larger effects for disadvantaged learners.  Policy and spending decisions at all layers of government should reflect this evidence. Should budgets allow, this is likely to imply higher levels of deprivation funding for schools.

Fairness and transparency in funding across schools and areas

Simpler and more consistent school funding formulae across local authorities would reduce differences in funding per learner across similar schools and make the reasons for any remaining differences fully transparent. The Welsh Government and local authorities should also continue to review the local government funding formula to ensure that it fairly reflects the needs and costs across areas.

Effective scrutiny enabled by consistent and transparent data  

Effective scrutiny is only possible when all stakeholders have access to clear information and data on how school funding is allocated. More consistent and detailed spending data would enable informed discussions between local authorities and schools about how best to use funding.

Clear expectations on future costs throughout the system  

The Welsh Government should produce rolling multi-year assessments of the likely future growth in school costs. Whilst such estimates could never be a guarantee of future funding changes, they would improve accountability by providing a high-profile benchmark against which to judge the funding decisions made by all layers of government (UK government, Welsh Government and local authorities).