Kevin McDaniel, Executive Director of Children’s Services, introduced the item, which was based on a request from the Panel for information on the overall funding in education and what was being done around the funding for special educational needs. This came about in a previous meeting after it was reported that the expenditure for High Needs Block elements was running in deficit.

James Norris, Head of Finance for Achieving for Children, gave a presentation to the panel on the Dedicated Schools Grant and High Needs Block.

He started off giving a summary of the Dedicated School Grant Funding (DSG), which allocated school funding into 4 blocks. Each block had its own formula to calculate the funding to be distributed to each local authority. The 4 blocks and their budgets were: Schools Block (£102 million allocated), the Central Schools Services Block (£1 million), Early Years Block (£10 million) and High Needs Block (£27 million).

James Norris then gave the current financial projection for 2021/22 for each block. The total net budget was £69.7 million with an in-year overspend of £900,000. When applying the £900,000 overspend to the deficit position from the previous financial year, the projected culminated deficit was £2.7 million or 2% of the total DSG budget allocation. Because of this overspend, a deficit management plan had to be prepared for submission to the Department for Education to explain how the in-year overspend would be brought in-budget and in future years and then reduce the overall accumulated deficit.

James Norris moved on to the financial trend. In summary, the deficit started in 2018/19 financial year and the deficit in 2022/23 is projected to be £4 million or 3.5–4% of the overall school budget.

James Norris then discussed the High Needs Block deep dive which he divided and analysed into 7 categories. He stated some of the blocks were “relatively on track” and a couple of block categories experienced a projected underspend: ‘Retained DSG’ experienced an underspend of £91,000 (-1%), while ‘Alternative Provision and other non-SEN’ experienced a £215,000 (-20%) underspend.

Meanwhile, to varying extents, other block categories experienced a projected overspend, including ‘OLA Schools Top Ups’ (£60,000 or 7%), ‘Placements-Independent, ISS, NMSS’ (£1.003 million or 18%), ‘Free Schools’ (£520,000 or 61%), ‘Placements-FE Colleges/ISPs’ (£370,000 or 23%), and ‘SEN Support Services’ (£184,000 or 9%).

The overall total High Needs Block budget was £21.7 million with a projected variance of £1.8 million overspend (or 8%).

James Norris then moved on to the progress update on the Deficit Management Plan. He stated that a deficit management plan was being formulated to address the cumulative deficit position with a recovery period of 3-5 years. This plan had to be submitted to the Education and Skills Funding Agency (ESFA) on behalf of the Department for Education.

Following a Schools Form meeting in October 2021, it was agreed amongst the School Forum members and officers to explore key themes including expansion of the local offer within the Borough, increased local partnerships incorporating working with neighbouring authorities, and improved commissioning arrangements with greater focus on annual reviews and unit costings.

The Deficit Management Plan had to be signed off by the Executive Director of Children’s Services and the Executive Director of Resources. It would then be reported to the School Forum in April 2022.

The Panel then asked their questions.

Councillor Tisi asked for clarity regarding the significance of the free special schools, namely did different placements in different settings cost differing amounts of money. James Norris replied that the free special schools were state-funded, independent special schools which offer more places, and the local authorities had to pay the place funding rate. He also added this could create more costs compared to people remaining in the mainstream school. He also stated that the Borough did pay on an individual child-by-child basis.

Councillor Tisi followed on by asking what mechanism was used for schools that wanted or needed more places and therefore more funding, whether this was done by the school itself or a child’s EHCP (Education Health and Care Plan).

Kevin McDaniel answered by using Forest Bridge School, a specialist school, as a case study. Recently, the school moved to a larger building which was funded through capital expenditure from the government. As a result of this move, the school had more places which then the High Needs Block would fund the first £10,000 per place in that school. This would obviously take money from the budget.  The local authority then pays a top-up based up on the individual pupil needs.

He added that when a child was placed by another local authority, then that local authority would pay for the additional amount, while the Borough would pay for the place funding. As such, Kevin McDaniel mentioned that one of the downsides of developing free schools is that it would have impact of the regular budget.

The Chairman asked Kevin McDaniel if it was correct that there were six applications for placement. Kevin McDaniel explained that families and schools could apply for Educational Health and Care Plans (EHCP) – typically receiving a dozen new applications every week – if they believed the child required support. This would then go through a process which has a statutory 20-week target timescale to go through the assessment process to name a school to place that child. Once a school was named, the child would be placed either in a mainstream school with an EHCP, a special school or a non-maintained special school. At this point, more money would be taken from the budget. He then stated that in the last couple of weeks, six pupils were placed in special schools from this process, albeit at “significant cost” to the High Needs block.

He also stated that it was forecasted that £200,000-400,000 was to be spent on new placements for the rest of the year as new applications came in every week.

Referring to James Norris’s comment that the Borough’s situation in terms of funding was not unusual, Councillor Sharpe asked James Norris how the Borough compared to other local authorities in terms of this financial situation.

James Norris answered that the deficits of Richmond and Kingston boroughs were in the double digits or more, believed to be around 10-14%. Meanwhile, RBWM’s deficit was around 2%. He added that, according to ESFA (Education and Skills Funding Agency) representatives, the deficit being at around 2-5% was a sign that the borough was doing quite well. Therefore, RBWM’s deficit situation was seen favourably compared to other boroughs but it still needed to be addressed by the plan.

Councillor Sharpe further asked if other boroughs were in a similar situation to RBWM in having a deficit recovery plan. James Norris confirmed this: all boroughs in deficit had to submit a deficit management plan. Kevin McDaniel elaborated James Norris’s answer. He stated most of the 19 local authorities in south-east England had a deficit on the High Needs Block. Because of this, there was work with DfE (Department of Education) to work on the unpublished SEND (special educational needs and disabilities) review. This was dealing with the financial issue caused by different pressures within the system, such as more children with complex needs which therefore required support, and schools struggled to balance their budgets because everything was becoming expensive.

Kevin McDaniel also added that in some local authorities in other parts of the country there was a significant fall in school numbers, and therefore they were not experiencing the same financial pressures as they had less pupils for similar resources. In contrast, it was a common situation in the south of England at the moment.

Mark Jervis asked Kevin McDaniel on whether the 9% increase in volume for the High Needs Block was driven by Forest Bridge School moving to a larger building, the impact of the Covid pandemic or was it a long-term continued trend. Kevin McDaniel answered that the 9% increase in volume was caused by an increase in education health and care plans across various schools, including maintained special schools and non-maintained independent schools. This was because RBWM was experiencing an increase in request for specialist education as this was seen as better serving young people. He also mentioned that Covid would have played a role as well.

Councillor Carole Da Costa asked what the consequences would be if the deficit was not curtailed. Kevin McDaniel, Adele Taylor, Executive Director of Resources, and James Norris collectively answered. The financial deficit for education was an issue on a national level, hence why there were SEND reviews. There was mention that there was a school surplus balance for the maintained schools at the end of December 2021 was over £2.3 million in credit, compared to last year where there was a £1.8 million deficit. This reduced concerns of deficit during the last financial year but was unsustainable in the long-term and therefore work needed to be done to resolve the deficit.

Councillor Carole Da Costa followed up by asking where the Borough was going to make savings or cuts. Kevin McDaniel answered that it would be difficult to reduce expenditure as every child had a right to an adequate education. Therefore, it would be better to find alternate methods. James Norris elaborated Kevin McDaniel’s answer by stating the 4 themes to tackle to the deficit: maximise value for money for all services, raise the effectiveness of commissioning arrangement, maximise the local offer and new programs of intervention.

In reference to the Borough paying for the first £6,000 per school placement as part of the notional SEM budget, Councillor Tisi asked about if Kevin McDaniel mentioned a fixed rate or fixed fee that the authority pays per placement. He answered that mainstream schools got their finances through a formula based on the number of children enrolled. Special schools and resource units were commissioned at £6-10,000 per placement, giving the schools a base budget to be able to recruit sufficient staff. When children were placed, the schools would receive a top up amount.