Finding the money. Where can the promised £1.3bn in education funding come from?

The recent announcement from Education Secretary Justine Greening to increase funding for schools has been welcome. However, her budgetary balancing act will be difficult to sustain and, as she says, involve some difficult choices. Delivering this benefit within the Department for Education’s (DfE) existing budgets will require reductions in capital, and this will pose a further challenge for the Education and Skills Funding Agency (ESFA) and local authorities.

The ESFA has earned a reputation in Government for reliable delivery and reducing costs to the public purse, and it is clear they are going to have to continue to do more for less.  The school estate will continue to crumble and the 654,000 additional school places required by 2026 will still need to be provided.  The easy wins in tackling these issues have already been gained and further savings may be more difficult to achieve.  

However, there are numerous initiatives available, all of which could result in some significant savings per annum. A menu comprising any number of these potential options could contribute a big part of the required £1.3bn per annum identified by Justine Greening. 

Land Costs: £1.2 billion

The DfE property agency, LocatED, promised the ability to bring forward mixed-use sites, but too often land has been bought at market value with just a school put on it.  Now, more than ever, LocatED needs to deliver what it promised and to maximise the value of sites developed.  This would reduce the cost of new land, as well as create the added potential for more affordable housing. 

It is also better value to have fewer, larger schools, and to realise value from surplus sites. Local authorities should be encouraged and incentivised to undertake Area Reviews, as rationalising the school estate could realise up to £179 million alone.

However, inefficiencies can occur when schools are established or expanded adjacent to local authority boundaries. Child places should be planned on a regional, rather than local authority basis, and if regional government bodies are mandated to take the lead it would create a better join-up between regeneration bodies and education authorities in the competition for land. 

Finally, many universities and hospitals are notably inefficient in their use of assets.  In the health sector, the Naylor Review estimated that £5.5bn of land value could be realised simply by rationalising the estate. Whilst the NHS needs this money, the creation of mixed-use developments on health sites would reduce the costs for new schools.  This may require some primary legislation but the Government has to join up this opportunity. Meanwhile, the advent of student fees has created up to £2bn per annum of surplus, much of which has been ploughed back into major capital projects at universities.  Whilst universities need to invest to maintain their competitiveness, it may be that the monies yielded by student fees are more needed to fund the schools sector.  

Funding and financing: £413 million 

Since the advent of the Community Infrastructure Levy (CIL), the effect of the local CIL Scheduling process has been to reduce funding that flows from development projects to schools.  Whilst it is right that CIL Scheduling is identified locally, the rules and guidelines for this should be reviewed to ensure that up to £113 million flows where it is most needed.

Meanwhile, up to £200 million could be released through Private Finance Initiatives. Whilst this form of funding increases the overall lifetime cost of a new school, it also defers spend to a time when the economy has better recovered. 

Renting school space from an investor, rather than transferring land to the public estate, can also help to defer capital cost. Our modelling for a secondary school in a relatively high value urban location suggests that a rental cost of £600,000 per annum could defer a £15m capital cost and release up to £100 million a year. 

Design and delivery: £200 million

We also need to look at greater standardisation in the design and construction process; this could release a further £200 million. The ESFA has led the way amongst public authorities in standardising design and delivery processes but, by aggregating projects, more value can be gained from procuring factory-produced buildings. This will allow better use of technology; counter labour shortages; reduce delivery time; and produce more energy efficient buildings.

Whilst new schools are being delivered at a cost of £8,200 per child place, ‘scope creep’ often means that school expansions typically cost between £12,000 and £20,000 per place. Delivering expansions for lower costs requires consistency in the facilities that are provided. For this reason, the ESFA should consider setting rules and providing support to local authorities to ensure efficiencies can be met. 

Finally, the ESFA allocates £1.3bn of maintenance funding annually to schools, but doesn’t track what it is spent on. Centralised delivery of repair programmes on a regional basis would create opportunities for efficiency. 

While there is no one single solution to this budgetary balancing act, it is clear that the DfE will have to look again at a menu of options to release the funds required. And Government will have to re-double efforts to join up the planning, development and management of land assets across departments and agencies.