Nov 14, 2017 - student loan forecasting. The remaining 10% of the underspend is attributable to other factors. We expect
Committee of Public Accounts House of Commons London SW1 A OAA
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Tel 020 7219 4099 Email
[email protected]/pac
Jonathan Slater Permanent Secretary Department for Education Sanctuary Buildings 20 Great Smith Street London SW1P 3BT
14 November 2017
Dear Permanent Secretary Department for Education Annual Report and Accounts Thank you for answering our questions on the financial health of schools and key risks affecting the education sector in our evidence session on 12 October, and for your letter dated 30 October providing further information on how the Department is taking forward the Committee's recommendations on the financial sustainability of schools. We note the Department has made progress with its accounts and further note the improvements it is making to its financial management. Although we note the current health of the accounts is largely due to the student loans portfolio. In the session, you attributed 90% of the Department's £8.4 billion underspend in 2016-17 to the buffer it had created to manage the inherent volatility in student loan forecasting. The remaining 10% of the underspend is attributable to other factors. We expect the Department to minimise this other underspending as far as is practical. We continue to be concerned about the scale of the challenges the sector faces. Although we will not be publishing a report on this session, we will publish this letter detailing our ongoing concerns . Promised additional funding, school budgets and efficiency savings During the session we raised the £1.3 billion of additional revenue funding promised to schools across 2018-19 and 2019-20. We note that this funding is being drawn from within the Department's existing budget including planned savings from:
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• Efficiencies and savings across the main capital budget to release £420 million. The majority of this from healthy pupils capital funding to make savings of £315 million. • Delivering new free schools more efficiently to release savings of .£280 million up to 2019 20 including by building new schools on local authority land. • Redirecting £200 million from the Department's central school improvement programmes towards frontline funding for schools.
We pointed out that this additional funding when balanced against £3 billion of efficiency savings the Department expects to be delivered by 2019-20 was not a net gain for schools. We asked how the Department was monitoring the impact of the efficiency savings on schools given reports we were hearing of schools restricting their curricula and teaching hours. We also asked whether the Department could quickly identify schools in financial difficulties. During the session you said that the ESFA was recruiting financial specialists who could work with regional schools commissioners to support struggling schools. In your letter you said that academy trusts would be offered the support of a school efficiency adviser in a phased approach, starting with the trusts most in need of support. For local authority maintained schools, you said that the ESFA is working with the Office for National Statistics to develop a method to identify schools at risk of financial difficulty, and the ESFA would consider the use of school efficiency advisers to provide support to these schools where local authorities have a capacity or capability issue. We remain concerned about struggling schools being picked up and supported, and look forward to hearing further on these efforts. We also raised the new procurement hubs and realistic savings from these - you acknowledged that using the hubs was not yet the norm for schools. We remain concerned about the support the Department and the ESFA can realistically provide to schools whose budgets cannot stand up to the savings demanded of them. In your letter, you told us that the ESFA has developed additional key performance indicators to help monitor the impact of its financial interventions. We have previously emphasised the importance of using evidence to assess whether the ESFA's interventions are actually successful in tackling the financial issues schools are facing. On the savings from efficiencies through the free schools programme, we noted these are partly expected to come from local authority land being used as the sites for some new free schools, which would bring down the unit cost. We pointed out that this is a major challenge in areas where available land is scarce such as London. The Committee has previously raised concerns about the cost of free school sites including four in London which cost over £30 million. The Department's plans to reduce the cost of school sites is something that should not have come through at this late stage of the free schools programme and shows a clear lack of thinking at the early stage of the programme. We would welcome an update on the Department's work with local authorities to secure future sites. Early years The Public Accounts Committee has previously looked at the Department's planned roll-out of 30 hours free childcare. Ahead of the roll-out we found variation in levels of take-up of the original 15 hour free entitlement and significant concern about supply problems in deprived areas. We expect the Department to be overseeing local authorities' role in ensuring that there are sufficient childcare places, particularly in deprived areas, and intervening with local authorities where local childcare markets are struggling. We also expect the Department to work with local authorities to make sure parents know about their entitlement to free childcare and provide accessible information. The Public Accounts Committee has previously expressed concern that there may not be enough providers willing to provide the extended entitlement at current funding rates and that disadvantaged children may be disproportionately affected. We continue to be concerned about the impact funding rates may have on the quality of provision. You said that, nationally, the funding per hour the Department has set exceeds the average cost of provision by £1. You also told us that the Department's early years funding formula takes account of variations in cost between areas
and that it is working on plans to improve the quality and training of the workforce. The Department continues to quote national averages which masks significant local issues. We expect the Department to assess whether providers can offer the existing and extended entitlements with current funding rates. We also expect it to make sure that there are enough people with the right skills to work in the childcare and early years sector. You said that providers are able to charge parents for services that are additional to the free entitlement. However, you assured us that parents should not be excluded from accessing childcare where they choose not to purchase these services. We also understand that children should be able to take up their free hours as part of continuous provision. But we raised the example of a London parent whose 30-hour entitlement covers 67 per cent of her child's nursery costs and that the nursery does not provide lunches or nappies. They are therefore required to top up their fees so their child can attend the nursery. We expect the Department to understand the extent to which providers are following its guidance, be realistic about the difficulties providers face in providing extended hours at current funding levels and identify how effectively local authorities are ensuring that all eligible children can take up the free entitlement free of charge. Children's services The Department's annual report highlights the risk that a widespread failure of local authority children's services poses to our nation's most vulnerable children and families. In our report on child protection (HC 713), published in December 2016, we found that variability in the quality and consistency of help and protection services is leaving children at risk of harm and that the Department had made slow progress in addressing this. We also found that the Department lacked a credible plan to achieve its ambition that, by 2020, all vulnerable children, no matter where they live, receive the same high quality of care and support. We therefore recommended that the Department should, year on year, set out detailed plans, including a timetable and resources, for how it will achieve its ambition. We are disappointed to see in the roadmap that the Department sent to us that you now aim to achieve your ambition by 2022 rather than 2020 and that, even with this delay, a number of important actions within the plan have not yet been confirmed. Given the serious consequences for children, and that the Government first identified the need to improve these services in 2010, further delay is unacceptable. We therefore ask the Department to justify its decision to push back the completion of its programme to 2022, provide assurance that it will be delayed no further, and provide us with a revised roadmap with fully confirmed actions and milestones as soon as possible. We see that the roadmap promised to launch a new improvement programme for local authorities in October 2017. Further detail on this crucial element of your plan would be helpful. Please can you explain your criteria for identifying at risk local authorities, how many you think that there are, how you intend to improve them, and what money you have available to fund this improvement. Further education The Department's annual report also identifies risks around delivering the post-16 reform programme, which includes successful restructuring of the further education sector, managing funding reductions, and implementing the further education workforce programme.
Please can you write to us to explain what your monitoring of the financial health of further education colleges is telling you, how the implementation of area reviews is progressing, and the number of further education colleges that you expect will need close or merge as part of the restructuring to make the sector financially sustainable. I am copying this letter to Peter Lauener, the Comptroller and Auditor General and the Treasury Officer of Accounts. Yours sincerely
MEG HILLIER MP
CHAIR OF THE COMMITTEE OF PUBLIC ACCOUNTS
