To all Chief Education Officers

of Local Education Authorities

in England

9 June 2003 Our Ref: LEA/0166b/2003

Dear Colleague

SCHOOLS’ BUDGETS

I am very grateful to you for your prompt response to my letter of 2 May. I want to express my particular thanks for the way in which local authority colleagues generally have responded to concerns about schools’ budgets, and the Department’s need for up-to-date advice and intelligence. We are keen to continue working closely with you on these issues, reflecting our shared responsibilities.

The purpose of this letter is to set out where we have got to on 2003-04 budgets, and, in particular, to explain how we are approaching 2004-05. I do not think it would be sensible for me to try to respond in writing to all of the issues raised in correspondence, particularly as the local picture is developing all of the time. Colleagues in the Department will, of course, continue to be in touch directly to take forward particular issues, and to get your up-to-date intelligence on the local position.

2003-04

We all recognise that the challenge this year has been to manage through the complex interaction of a number of factors, notably the new funding formula; the transfer of funding to reflect the teachers’ pensions increase; substantial changes to the Standards Fund grants and Nursery Education Grant; and the working through of the teachers’ pay settlement. Although we have seen large cash increases overall this year, the cost pressures have been substantial and of course have varied at school and authority level, depending on cost structures and local deployment of resources.

We know that the budget setting process has been difficult, and still poses challenges in some areas. We have provided some additional help from the centre, but have been conscious that it is very difficult indeed for the Department to allocate necessarily limited additional resources in a way that responds to the particular needs of localities. Some authorities have provided more from their own resources. We know that many authorities and schools have faced up to difficult decisions, backed by a great deal of hard work, in setting budgets, on the basis of our commitment that better arrangements will be in place next year. We are in close touch with a number of LEAs to help them to manage remaining issues.

As we work towards confirmed schools’ budgets for all schools in 2003-04, it is clearly vital to continue to focus on the implications for the school workforce – to try to ensure that decisions on short-term costs do not cut against the longer term development of schools and the wider education service; and above all to ensure that the education entitlement of young people is honoured in every area.

It will not surprise you to know that our dealings with local colleagues generally over the past few weeks have shown a great commitment to engaging with and managing through these complexities. I have been personally involved in discussions with a number of CEO colleagues, and we have received a great deal of feedback from LEAs and schools which will be very useful in helping to analyse the problems that schools and authorities have encountered this year, to understand better the budget process at local authority level and to improve the way that we work with you.

2004-05

We are committed to learning quickly from all of this experience, and to putting in place better arrangements for next year. We are currently working hard with government, local authority and other stakeholder colleagues to make changes which address directly the issues that have arisen this year.

As you know, the Secretary of State has made clear that the key priority now is to ensure all schools receive a reasonable per pupil settlement in 2004-05. To meet this goal we are discussing with national partners how best to ensure:

· sufficient education funding increases for every LEA;

· the right balance between support through general grant and through ring‑fenced and targeted grant;

· confidence that schools and pupils will receive the money intended for them;

· the right balance between in-school and out-of-school provision;

· fair and appropriate variations in the budget increases received by different schools within each LEA;

· that workforce reform, in line with the National Agreement, can be sustained.

We are working through this agenda with our national partners, and want to ensure that the necessary changes are in place in good time to enable schools and LEAs to plan effectively for 2004-05 and for 2005-06. We hope to make announcements on the key issues in early autumn.

We look forward to continuing to work with you.

Yours sincerely

STEPHEN CROWNE

Director of Resources, Infrastructure

and Governance Group