Public Expenditure

House of Commons Education and Skills Committee Public Expenditure First Report of Session 2004–05 Report, together with formal minutes, oral and written evidence Ordered by The House of Commons to be printed 15 December 2004 HC 168 Incorporating HC 687–i and –ii of Session 2003–04 Published on 7 January 2005 by authority of the House of Commons London: The Stationery Office Limited £14.50 The Education and Skills Committee The Education and Skills Committee is appointed by the House of Commons to examine the expenditure, administration and policy of the Department for Education and Skills and its associated public bodies. Current membership Mr Barry Sheerman MP (Labour, Huddersfield) (Chairman) Mr David Chaytor MP (Labour, Bury North) Valerie Davey MP (Labour, Bristol West) Jeff Ennis MP (Labour, Barnsley East & Mexborough) Mr Nick Gibb MP (Conservative, Bognor Regis & Littlehampton) Paul Holmes MP (Liberal Democrat, Chesterfield) Mr Robert Jackson MP (Conservative, Wantage) Helen Jones MP (Labour, Warrington North) Mr Kerry Pollard MP (Labour, St Albans) Jonathan Shaw MP (Labour, Chatham and Aylesford) Mr Andrew Turner MP (Conservative, Isle of Wight) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at: www.parliament.uk/parliamentary_committees/education_and_skills_committee.cfm Committee staff The current staff of the Committee are David Lloyd (Clerk), Dr Sue Griffiths (Second Clerk), Libby Aston (Committee Specialist), Nerys Roberts (Committee Specialist), Lisa Wrobel (Committee Assistant), Susan Monaghan (Committee Assistant), Catherine Jackson (Secretary) and John Kittle (Senior Office Clerk). Contacts All correspondence should be addressed to the Clerk of the Education and Skills Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6181; the Committee’s email address is [email protected] Footnotes In the footnotes of this Report, references to oral evidence are indicated by ‘Q’ followed by the question number. References to written evidence are indicated in the form ‘Ev’ followed by the page number. Public Expenditure on Education and Skills 1 Contents Report Page Summary 3 1 Introduction 5 2 The effectiveness of increased expenditure on education and skills 6 Increased expenditure since 1997 6 Future levels of expenditure 9 3 Schools’ funding 11 4 Staff reductions 16 5 Financial management capabilities of the DfES 20 Underspending 20 Outsourcing 21 Review of schools’ funding 22 Conclusions 22 6 Further Education 25 Disparities in funding 25 Standards in further education 26 Conclusions and recommendations 28 Formal minutes 30 Witnesses 31 List of written evidence 32 Public Expenditure on Education and Skills 3 Summary The effectiveness of increased expenditure The Chancellor’s budget book for 2004 claimed a direct relationship between the increased investment in education since 1997 and improvement in GCSE results in particular. Our evidence showed that with lower levels of investment GCSE results had improved to at least the same extent in earlier periods in the 1990s. The Government needs to take great care in making claims about the effectiveness of increased investment in education in increasing levels of achievement which the evidence cannot be proved to support. Links between expenditure and outcome remain difficult to establish. Schools’ funding The DfES declined to undertake the survey of schools which we requested in our report last year to establish the extent of funding problems in schools in 2003–04. A survey by the Audit Commission found that there was no widespread funding crisis. This confirmed our conclusion that the DfES reacted to perceptions of crisis rather than an actual crisis. The consequences of the problems with schools’ funding in 2003–04 have been far- reaching. Given that the settlement for 2003–04 was distributed using a new funding formula, it is remarkable that within eighteen months the whole rationale for that original change, that the funding system needed to be fairer and more redistributive, has been abandoned in favour of a highly pragmatic near flat-rate system, with three year budgets being introduced in 2006. This change has led to the loss of LEAs’ ability to make any executive decisions about schools’ funding in their areas and will, we believe, inevitably lead to far greater involvement of the DfES in day-to-day management of the school system. The DfES seems content to say that the formula spending share system failed, but that it does not matter to what extent and for what reasons it did not deliver the desired result. This is incredibly short-sighted. There is no proper evidential basis for saying that change is merited, and no way of being confident that the changed system will adequately address any problems that exist. For a Department that believes in evidence-based policy the DfES has remarkably little evidence to support the changes it is making. Staff reductions We accept the principle of the Gershon review’s proposals to increase efficiency in public services and to redistribute resources to the front line. However, the 31% proposed cut in DfES staffing has clearly not been effectively worked through. It may or may not produce the strategic department that the Government wishes to see. In order for us to understand fully what is being proposed, the Department should make public both the detailed reasoning behind the headline 31% staff reduction and a comprehensive assessment of the risks in making that reduction and the ways in which they are to be managed. In particular we need to see evidence that schools’ funding will in future be overseen effectively without a large new bureaucracy. 4 Public Expenditure on Education and Skills Management capabilities of the DfES We have identified financial management and project management problems within the Department, and it clearly needs to address its methods of working in order to limit the possibility of similar problems in the future. Further Education Much of the education for 14–19 year olds is provided by further education colleges and the proportion is likely to increase as greater encouragement is given to vocational education and training. One of the issues that has been raised with us is the differential in funding per student between schools and further education colleges. This is particularly relevant to sixth forms. It makes no sense that a student undertaking a course at a further education college should, other things being equal, be less well funded than a student taking the same course at a local school, but progress towards equal funding is painfully slow. Greater urgency is needed. Further education colleges should not be seen as a means of providing education on the cheap. Public Expenditure on Education and Skills 5 1 Introduction 1. This report arises from the Committee’s annual examination of DfES expenditure and management of resources. It is based principally on the Department’s Annual Report,1 and meetings with the Rt Hon Charles Clarke MP, Secretary of State for Education and Skills, and with Mr David Normington, Permanent Secretary, and Mr Stephen Kershaw, Director of Finance, of the Department for Education and Skills. 2. Last year in the equivalent inquiry one expenditure issue overshadowed all others: the funding of schools. This year saw a more varied picture and so in this report we comment on a range of issues about DfES expenditure on, and management of, the services within its remit. We do, however, return to the subject of schools’ funding and changes that the Government intend to make to the funding system, which could have far reaching effects on schools and local authorities. 3. We are grateful for assistance with this inquiry from Tony Travers, Director of the Greater London Group at the London School of Economics. 1 Departmental Report 2004, Department for Education and Skills, Cm 6202, April 2004. 6 Public Expenditure on Education and Skills 2 The effectiveness of increased expenditure on education and skills Increased expenditure since 1997 4. Public expenditure on education in the United Kingdom was equivalent to 5.5% of GDP in 2003–04, a rise from 4.7% in 1997–98. Table 1 shows education spending as a proportion of GDP for each year since 1997–98. Spending has increased as a share of the economy during a period of economic expansion, so the resources made available have increased significantly in real terms. It is worth adding that public expenditure on education and skills as a proportion of GDP was also well over 5% in the early 1990s. Table 1 Public expenditure on education as a % of GDP, 1997-98 to 2003-04 (United Kingdom) 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 Education as % of GDP 4.7 4.6 4.6 4.8 5.1 5.2 5.5 Source: Public Expenditure Statistical Analyses 2004, Cm 6201, Table 3.4, TSO, London 5. Another way of analysing spending is to compare changes adjusted to take account of inflation (ie in real terms). Table 2 shows real terms spending on each phase of education in each year since 1997–98. Table 2 Education expenditure, by sub-sector, 1997-98 to 2003-04 England £ million, in real terms Change 1997-98 1997-98 1998-99

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