## Again on Lump Sum

Mr Adams tells me that the discussion over lump sum at the meeting on the 6^{th} June revolved mainly around two values £80,000 and £93,354, depending on how the MFG computation eventually works. These figures are odd, and well below expectation.

Two basic principles – not necessarily consistent – have been suggested by various members as a way to determine the lump sum element:

- Choose the lump sum to be an accurate reflection of the fixed costs of running a school.
- Choose the lump sum such that the funding turbulence in schools, introduced as a result of this formula review, is minimized.

The values of £80k and £93k are not consistent with either principle, as I outline below.

**Are these an accurate reflection of the cost of running a school?**

As I pointed out in a previous post, the mean fixed costs of running a school in Essex are around £150k. The lower quartile was £135,202. Not a single school reported a fixed cost of less than £100k.

**Are these values that minimize turbulence?**

As I suggested in a previous post, a lump sum in the region of £117,180 would – on average – reproduce the effect of the 2011/12 formula. Even if we allow for the 1.5% reduction in per pupil funding most small schools are currently on as a result of the 12/13 formula change, this gives a lump sum of £115k. The figure of £93k therefore will cause significant turbulence to the smallest schools.

In order to illustrate this point, I have generated the graph below (primary schools only). This shows what happens if you distribute the funding that in 2012/13 went into lump sum, key stage funding, and minimum funding guarantee, under a variety of scenarios. These are:

- The 2011/12 small school funding, lump sum, and an average of the TCA allocation, with the remainder distributed proportionally to pupil number.
- As above, less 1.5% to model the status quo for small schools who have found themselves on MFG as a result of the 2012/13 formula changes.
- The 2012/13 small school funding and lump sum, with the remainder distributed proportionally to pupil number.
- A lump sum of £93,354, with the remainder distributed proportionally to pupil number.
- A lump sum of £115,000, with the remainder distributed proportionally to pupil number.

The plot has been zoomed in to see the impact on small schools. It is clear from the plot that the value £93,354 represents yet another significant cut for small schools in Essex – and indeed on a significantly greater scale than the cut last year!

This should not be a surprise: under the current formula, very small schools get a top up in the region of £30k on top of their lump sum of £77k. This is down around £4k from what they received in 2011/12 (a loss of around £8k in small school subsidy and an average of £3k in TCA, but an increase of £7k in lump sum). This cut pales into insignificance compared to the £14k cut when moving to a £93k lump sum.

**MFG or no MFG**

Returning to the two figures Mr Adams mentions, £80k and £93k, it is worth pointing out that these are not only inconsistent with the above-mentioned principles, but also with each other. Under lump-sum MFG exclusion, to achieve the same net effect in 13/14 as having a £93,354 lump sum with MFG re-costing, would require a lump sum of £85,461, not £80k. A greater lump sum would be required to maintain this net effect beyond Year 1.

I hope that this coming week we can return to discussion in the range £100k to £150k.