New free schools funding system 'incoherent' and offers poor value for taxpayers' money, PAC warns

The Government’s system for funding new free schools is “incoherent” and offers poor value for taxpayers' money, an influential parliament committee has found.

The Department for Education is spending “well over the odds” in its bid to create 500 more free schools, while local authority buildings crumble, the House of Commons Public Accounts Committee (PAC) warned.

In a damning new report, the committee criticised the Government's focus on free schools, which it said were sometimes opened in areas with no shortage of places for pupils while existing schools struggle to make ends meet.

The cross-party board also noted that each pupil place in a new free secondary school “costs 51 per cent more than places provided by local authorities”.

This was largely due to the high cost of land, which the DfE was found to be paying almost 20 per cent over official valuations for.

“The Department believes it is acceptable to appropriate community facilities and parks for routine school use,” the report’s authors said.

“Add to this that local authorities are legally responsible for ensuring that there are enough school places for all children to attend good schools, even though they have no direct control of free school or academy places or admissions policies.

“All this made us question how much of a grip the Department really has in providing school places where they are needed.”

The Department provides capital funding, totalling £4.5bn in 2015–16, to maintain and improve the quality and capacity of the school estate.

There is still not enough information to determine how much the school estate is worth, the PAC added, remarking that the DfE faced “significant challenges” in this regard, as many buildings are old and in desperate need of repair.

A further £6.7bn would be needed to bring the school estate up to a “satisfactory” condition, it has been calculated.

Labour’s Shadow Education Secretary, Angela Rayner, said the findings were indicative of a “crisis” within the school system.

“This is a damning verdict on the Government’s schools policy,” she said. “In the recent Budget the Chancellor announced plans that would only create one sixth of the school places we will need by 2021, and even those plans were drastically underfunded.”

Listening to evidence at the PAC hearing, MPs heard how one school was being forced to make two staff redundancies as a result of being unable to fund building maintenance costs.

It was also noted that some 85 per cent of schools are known to have asbestos. The only way to address this would be to completely rebuild the schools at a total cost of £100bn.

Analysing the report’s findings, the Institute for Fiscal Studies (IFS) remarked that the current freeze on school spending could come at an extra real-terms cost to the taxpayer of £2bn by the year 2021.

Luke Sibieta, IFS Associate Director for Education, Employment and Evaluation said: “The outgoing government committed to freezing school spending per pupil in cash-terms up to 2019–20. This implies a real-terms cut in spending per pupil of about 6.5 per cent between 2015-16 and 2019–20.

“If implemented, this would leave school spending per pupil at about the same level in 2020 as it was in 2010, undoing the increases which were actually afforded during the 2010-2015 parliament.”

The debate over school funding could well be the subject of a major battleground in the upcoming general election, the researchers said, adding that the current system of funding was “out of date”

“We haven’t had a proper funding formula since the early 2000s, which has allowed various inequities across areas to develop, which will only grow if left unaddressed,” said Mr Sibieta.

According to the PAC report, free schools - set up by parents or community groups outside of local authority - were helping to meet demand for places in some areas, but in others were opening where there was no shortage of space for pupils.

In some areas, local authority-run schools had spare capacity of more than 20 per cent, resulting in financial shortfalls because funding is linked to the number of pupils.

“In the context of severe financial constraints, it is vital that the department uses its funding in a more coherent and cost-effective way,” the report said.

The committee added that the Government's pledge to create 500 free schools - including some grammars - by 2020 involved spending “significant funds”, even in areas with no shortage of pupil places at a time when existing schools “struggle to live within their budgets and carry out routine maintenance”.

Free school supporters argue as many as 93 per cent of new school places created are in an area of demographic need.

Former education secretary Michael Gove said in response to the PAC report: “Free schools have raised standards and helped disadvantaged children enjoy opportunities they've been denied in the past.

"The higher standards and increased choice free schools bring make them hugely popular with parents."

Toby Young, co-founder of the flagship West London Free School, added: "It’s just nonsense to suggest they’re an expensive way of meeting the demand for new places.

"According to the National Audit Office report published earlier this year, free schools cost a third less than new schools created under Labour’s Building Schools for the Future programme."

The DfE often buys sites for free schools, but land is often scarce and costly in the areas where new schools are wanted, especially in London.

Some £863 million was spent on 175 sites for free schools from 2011 to last year at an average cost of £4.9 million, but 24 sites cost more than £10 million each, including four that cost more than £30 million.

“Land-owners are able to push up prices in the knowledge that the department has few, if any, sites to choose from,” the report said.

“The department is in a weak negotiating position and commonly pays well in excess of the official valuation. On average, it has paid 19 per cent over the official valuation, with 20 sites costing over 60 per cent more.”

Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers (ATL), said the PAC report was “a devastating critique of the Government's failure to provide sufficient school places for a rapidly growing pupil population”.

“The Government must get a grip,” she said. “It must reinstate local authorities into the planning and provision of school places, and demonstrate that funding will be made available to stop school buildings deteriorating further.”

Ms Rayner said: “With the Government failing our children so badly, it is no wonder that there are over half a million children packed in super-sized classes.

“When she was Shadow Education Secretary, the Prime Minister said large classes were a sign that schools were reaching crisis point. It is time for her to face the fact that she has created a crisis in our nation’s schools.”

The DfE insisted that official valuations were based on past deals for similar premises on the site's existing use and did not equate to the true market value.

A Conservative Party spokesman said: “We have been able to protect school funding and build the new schools we need thanks to our growing economy.

“Free schools are an important part of this: three quarters have been approved in areas where there is already demand for new places and the vast majority are providing children with a good or outstanding education.

“But all that would be put at risk with Jeremy Corbyn’s nonsensical economic policies putting our growing economy and funding for schools at risk. Because the Lib Dems and SNP would prop him up in a coalition of chaos, there’s a real risk of that happening.

“Only Theresa May and the Conservatives can provide the strong and stable leadership we need to lock in the economic progress we have made and deliver a good school place every child.”