Other funding streams

Between 2010/11 and 2016/17, Basic Need funding covered 58 per cent of the cost of providing new school places in London, based on London Councils’ analysis of boroughs’ annual school capacity survey (SCAP) returns. Targeted Basic Need funding in 2013-15 provided a further 8 per cent of funding, a time limited programme whereby boroughs were invited to bid for funding and all projects needed to be complete by September 2015. Local authorities must therefore draw on other funding streams to be able to provide sufficient school places.

A Free School capital pot is available from central government to fund the creation of new schools, although the size of this funding pot is unknown. New school providers are able to apply directly for funding out of the Free School capital pot; the main purpose of these schools is to provide additional choice rather than meet a shortfall of school places.[1] Where a new Free School opens to meet basic need, local authorities are expected to fund new Free Schools out of the Basic Need grant.

At a Public Accounts Committee hearing in 2010, the Department for Education committed to fully fund the cost of creating new school places. This does not reflect the experience of London boroughs, which continue to provide significant funding from their own resources.

Between 2010/11 and 2016/17, boroughs topped up central funding with £239 million of borrowing and £147 million of council funds, amounting to a combined 14 per cent of capital spend.

Any funding diverted from general council funds reduces the amount available to fund other council services, in the context of disproportionate funding reductions for local government. As core settlement funding to boroughs falls by a further 37 per cent in real terms between 2015/16 to 2019/20, it will become increasingly difficult for local authorities to subsidise the creation of new school places at the same time as delivering other priority services, such as adult social care.

Insufficient Basic Need funding has meant local authorities have had to use their own resources to fund new school places but also be creative with other funding streams. For instance, boroughs effectively negotiated developer contributions through section 106 agreements, providing a further £120.5 million of funding for school places, but this is not a reliable funding stream and is not a substitute for adequate Basic Need funding. If the cost of providing school places was fully met by DfE as they have previously committed to, Section 106 funding/council resources could be used by local authorities to support other local priorities to meet community needs.  

National data is not currently published on the scale of funding taken from individual school budgets to provide new schools places but, within the “other” category, several expansion projects were also funded by contributions from schools themselves.

[1] Free Schools entirely funded out of the Free School pot are not included in borough SCAP returns and therefore cannot be included in this analysis; by definition, the main purpose of these schools is to increase choice rather than to meet basic need.