NAO capital funding report: £6.7bn needed to rebuild crumbling schools, and 8 other key findings

The National Audit Office today published its report into capital funding for schools. We have the nine key findings.

1. The school places increase is being met so far – but cracks are showing

Demand for school places is continuing to grow. The government says primary place demand will rise by another 220,000 by 2019, with a massive 574,000 (21 per cent) extra places needed at secondary between 2016 and 2025.

The report found local authorities have been able to provide “sufficient school places to meet demand” so far (see image below).

Schools have also done so by keeping a “considerable” number of spare places.

Although primary numbers rose sharply in previous years, spare capacity fell by just one percentage point to 10 per cent between 2010 and 2015.

While in secondaries, falling pupil numbers and additional places meant spare capacity grew from 10 per cent to 16 per cent in the same time frame.

But capacity is not distributed evenly across regions.

The report also found that cracks are beginning to show. One in five local authorities responded to an NAO survey said they accepted longer travel times as part of their plan to provide sufficient places.

Nearly three in five councils also said that availability of land was a “major constraint” on delivering school places.

2. Councils stump up £340m a year to meet funding shortfall – with special schools hit hardest

Local authorities estimate they are spending £340 million every year to deliver places, because the government’s basic need funding does not actually cover the full cost of delivering new places.

The department said its current funding rates were based on how much it can deliver new places for, and were “sufficient on average”.

The report found this was because the department could group projects when putting tender, as well as funding large projects, which can drive economies of scale.

But government officials have identified that councils’ contributions “may not be sustainable … as funding from other government departments decreases, and land and construction costs increase”.

The shortfall is impacting special schools the hardest, where the cost of a place is, on average, four times higher than a mainstream primary.

Nearly four in five councils said this was a “major constraint” on delivering sufficient special school places.

The NAO warned consequences include SEND pupils having to travel further, or being “inappropriately” placed in mainstream schools.

The government has committed £215 million to meet the cost of SEN places from 2018.

3. The DfE has handed councils £700m for places that are no longer needed

The report was generally positive about the department’s approach to allocating places funding, stating officials now use much more detailed and up-to-date information to dish out cash.

But there are still problems over the funding allocations, which are based on forecasts of places.

For instance, in 2011/12, 56 local authorities had forecasts for primary places that were 25 per cent off the actual increase in the area.

The department, to provide “stability”, does not recoup any funding it has paid to councils whose demand fell below the forecast.

The NAO found the government had provided funding equivalent to 36,400 primary and 7,600 secondary places that will no longer be needed by 2019.

That equated to £700m of funding – although the report did state the places could be needed in the non-immediate future.

 4. Department questioning ‘financial viability’ of 9 UTCS, 7 free schools and 5 studio schools

The report has revealed that more than half of the 113,500 new places in mainstream free schools will actually create spare capacity in some of their immediate areas.

Futhermore, the department has assessed that 52 free schools opening in 2015 could have a “moderate or high” impact on any of 282 neighbouring schools (something covered in more detail here).

And it’s not just other schools being affected. The report stated the department had concerns about the financial viability of nine UTCs, seven free schools, and five studio schools because pupil numbers were “lowered than expected”. However the names of these schools was not revealed.

5. Government spends nearly 20% over the odds for free school sites

The government paid 19 per cent more than official land valuations for free school sites, the report found. A total of 20 sites cost 60 per cent more.

The NAO said a lack of alternative sites can make it necessary to pay above the odds, and the new LocatED company (set up to purchase and manage free school sites) should drive efficiency.

6. More than £200m spent on proactively snapping up potential school sites

The report found securing a site was adding “significant delays” to opening free schools.

As of September last year, the DfE had deferred the opening of 30 per cent of free schools – mostly over land problems.

Six free schools have been in temporary accommodation for more than four years.

Now the government is buying up land in areas where there is an expected need for places, before free schools have been approved.

A total of £207 million has been spent so far buying up 19 such sites. Twelve of these are linked to approved applications, and the DfE expects to buy more land this way in the future.

7. £6.7bn needed to bring every school building to ‘satisfactory’ condition…

A massive £6.7 billion would have to be spent to bring schools up to a “satisfactory or better” condition – mainly because around 60 per cent of schools were built more than 40 years ago.

Broken down, £5.5 billion would be needed for major repair works, and £1.2 billion to replace parts of buildings at the end of their lives or “at serious risk of imminent failure” (image below).

The costs vary significantly by region – from £2,100 per pupil to return schools to a satisfactory condition in the Isle of Wight, Northumberland, and Enfield, compared to just £100 per pupil in Stoke-on-Trent, and Knowsley.

But the report acknowledged the government does not yet have robust data on school condition, although the results of a £36 million property survey are due out at the end of this year.

8. … but those costs will DOUBLE by 2021 as more buildings reach end of life

The department states many of the older buildings will need to be replaced or significantly refurbished “soon”.

Department modelling suggests the cost of returning all schools to a satisfactory standard will double between 2015-16 and 2020-21.

(The report did warn the modelling was at an early stage, and more accurate estimates should be available later this year).

9. Limited cash could create ‘perverse incentives’ for heads to let schools fall into disrepair

The department will spend an average of around £2 billion per year (up until 2021) on school condition funding – way down on the spend of previous years (because they included major projects such as Building Schools for the Future). See image below.

The report also found that there is a risk of creating “perverse incentives” – as school leaders could let buildings fall into such poor condition they actually meet DfE replacement criteria.

There is also “limited mechanisms” to hold councils and academy trusts to account for keeping their buildings in good shape, the report found.

The government offers Condition Improvement Funding, which has a “core priority” to address a “significant condition need” to smaller academy trusts.

But the report found that one-fifth of Condition Improvement Funding (£90 million) was actually spent on allowing “good” or “outstanding” academies to expand – despite the funding pot applications being oversubscribed by between 2.5 and 4.3 times for the past four years.