The reality: rural schools and the council purse

Are Argyll & Bute’s rural schools really the financial burden the council makes out?

As Education Secretary Michael Russell confirmed in his statement to Parliament on Thursday 9th June 2011, no school should be closed on financial grounds alone – the legislation makes clear that the children’s education must be the fundamental consideration.

As was clear from the question-and-answer session which followed, on this issue there is an unusual level of consensus across all parties in Holyrood, and MSPs unanimously supported the introduction of new legislation last spring to protect exactly the category of schools currently under threat in Argyll & Bute with a ‘presumption against closure’.

At a local level, officers and councillors know enough about this legislation to realise that emphasising financial savings is taboo. Therefore, when talking about a specific school being closed, they stick mainly to promoting their plans by reference to the supposed educational benefits resulting from larger peer groups for both pupils and staff, or the facilities available in the bigger schools.

However, zoom out to the bigger picture and there is a dramatic reversal in the rhetoric. It quickly becomes clear that financial savings are the foundation of the case after all. In its rationale for proposing the closure of a swathe of rural primary schools, Argyll & Bute Council’s list of ‘Reasons for the Proposal’ is entirely about resources – and the need to either reduce them, or redistribute them more ‘efficiently’.

Divisive comments and hints appearing in council media releases and the press even suggest that rural pupils are somehow gaining an ‘unfair’ share of council resources and that this is impacting directly on the education of pupils in more populated areas and secondary schools.

Even the legislative consideration of ‘educational benefit’, assumed to be relevant to the pupils directly affected by a closure, is subtly twisted into a vague notion of ‘benefit to all pupils from increased efficiency’.

Everyone understands that council resources are under acute pressure, so if the government is keen to discourage councils from closing rural schools, should they not ‘put their money where their mouth is’ and provide the additional funding needed for this?

Most people will consider it intuitively obvious that smaller schools cost more per pupil to run than larger ones. This is indeed generally the case, although the difference only becomes really significant when looking at the schools with the very smallest rolls, and is mostly due to staffing rather than building costs.

Many people will also be aware that councils do receive additional funding from the government to help with this. The question which arises is: does this extra funding cover a reasonable proportion of the difference?

The Analysis – GAE and running costs

The GAE (grant-aided expenditure) system is a large and complex model which determines how much block funding councils receive from the government. One of the many ‘indicators’ used in the calculation is the number of pupils in primary schools, and the proportion of these who attend small schools.

The calculation is somewhat complex but the effect is quite simple: the council receives (in 2010/11) an additional £2,600 per year for every pupil who attends a ‘small’ school, defined as having fewer than 70 pupils.

This money forms part of the annual ‘pot’ given to the council from central funds – it isn’t a grant paid to the school and the council doesn’t have to spend it on that school or indeed on education at all. Nonetheless, it is intimately linked with the school, because it amounts to extra income ‘earned’ by its pupil roll. And it turns out to be quite a significant earner.

Analysis of council data for 2010/11 for school budgets and pupil rolls, and on the corresponding GAE figure for the same year, shows:-

2010/11 School Year

• Argyll & Bute Council had 78 functioning primary schools
• One third (26) of these had 70 or more pupils (‘large’ schools), and did not qualify for the additional GAE funding
• The annual budgeted cost per pupil at these large schools varied from £3,130 to £5,068 with an average of £3,762
• Two thirds (52) of primary schools had 69 or fewer pupils (‘small’ schools) which qualified the council for £2,600 per pupil additional funding. The combined roll of these schools was 1,375 pupils whose ‘GAE earnings’ added up to around £3.5 million
• The annual running cost for small schools varied from £3,911 to £113,925 per pupil with an average of £6,700
• Six of the schools (3 large and 3 small) have additional but separate Gaelic Medium Units which have been omitted from this exercise as they receive separate funding support and their rolls are disregarded for GAE calculation.

The significant fact from this analysis is that last year it cost, on average, £2,938 more to educate a child in a small Argyll school than in a large one. But that cost was not incurred by the council.

The government covered almost 90% of this directly through GAE and is therefore, it seems, already ‘putting its money where its mouth is’ on small school funding.

This 90% funding result is also a conservative estimae. The council receives additional per-school GAE funding for security, a ‘remote teachers allowance’ for the smallest schools, and SINA payments to offset the higher costs of island services including schools. Overall, Argyll & Bute Council is receiving close to full compensation from the government for the additional day-to-day running costs of its rural & island school estate.

The absence of any major savings from closure proposals is largely explained by the fact that the group of 1,375 pupils in small rural and island schools is costing the council no more to educate than if they all went to the large schools, as shown above.

If there are any demonstrable savings at all, they are dependent upon the fact that the GAE system is simplistic and fails to differentiate between ‘small’ schools of varying sizes. In theory it could be modified so that the smallest schools ‘earned’ the largest per-pupil grant while the larger ones received only the minimal amount needed to bring them in line with the average. However, although this would change the incentives for the council,  it would make little difference to the total amount received from the government.

A final point is that the GAE indicators providing this extra income are effectively an instrument of government policy. Entitled ‘Primary School Teaching Staff’, they are there to support Parliament’s aspiration that existing smaller schools should be protected from closure on cost-cutting grounds. The title given to the ‘indicators’ reflects the fact that the additional costs of maintaining these schools are mostly in staffing.

As this support is set on the basis of need, it is no coincidence that it has been calculated to provide just the right amount of funding. If councils reduce the number of the smallest schools, in effect to ‘work the system’, there is every prospect that the GAE funding will in due course be reduced to match the revised need, wiping out any savings made altogether.

The enormous value which Argyll & Bute’s scattered small communities place on their primary schools is obvious to all who have observed the last seven months’ wrangling, and their importance to the long-term sustainability of those communities not in doubt. Although no attempt has been made to quantify that value, it is clearly being provided at little cost to the council purse.

Councillors need to think very hard about the wisdom of continuing down a destructive and unnecessary path which would see much lost for nothing gained.

Tim McIntyre