‘Toxic magic money tree’ - warnings over deficit schools funding

PUBLISHED: 06:46 21 February 2020 | UPDATED: 08:14 21 February 2020

Lacey Douglas, administration manager at The Heather's Nursery, has highlighed the

Lacey Douglas, administration manager at The Heather's Nursery, has highlighed the "dangerous" underfunding of Norfolk's pre-schools. Photo: Lacey Douglas


A councillor has warned that government plans to pay for special needs education via deficit funding could amount to a “toxic magic money tree”.

Steve Morphew, Norwich. Picture: DENISE BRADLEYSteve Morphew, Norwich. Picture: DENISE BRADLEY

Dozens of childcare providers have previously highlighted concerns that central government funding intended for pre-school - or early years - costs had been reallocated to plug gaps in Norfolk's special needs budget.

And now fears have been raised about changes to the way the government allows councils to go into deficit on money known as the dedicated schools grant (DSG).

Guidance issued by the Department for Education (DfE) last year now requires local authorities with a DSG deficit of more than 1pc to submit a recovery plan which will bring their deficits back into balance within a three-year timeframe.

The guidance on recovery plans, which came from the Education and Skills Funding Agency (ESFA) in March, states that the government had changed its rules around how councils must report DSG reserves, which "positive or negative, should in future be reported as a separate ringfenced reserve".

Broadland district councillor, John Fisher. Photo: Broadland District CouncilBroadland district councillor, John Fisher. Photo: Broadland District Council

These reserves are "not taken into account in assessing local authorities' ability to set a lawful balanced budget" - meaning auditors will not have to consider this specific amount of debt when judging a council's viability.

And the guidance document also indicates that repayment periods may extend beyond a three year timeframe.

READ MORE: Fears early years education in 'dangerous position' as £2.5m funding diverted

It states: "We recognise this new requirement may prove difficult for some local authorities.

"If a local authority feels that a three-year time frame is not realistic, it will be able to submit with its plan evidence that states how this may not be achievable."

Steve Morphew, leader of the Labour group on Norfolk County Council (NCC) said: "This takes funny money to a whole new dimension.

"The council can write the cheques for high needs costs and simply accrue it as a debt off the books. This is deficit funding.

"For the past few decades deficit funding has been strictly illegal.

"Councils are legally required to balance the books year on year - unlike the NHS for example."

He added: "It's what Derek Hatton used in Liverpool in the 1980s that caused such a scandal at the time which is an ultimate irony.

"It's a real live magic money tree that looks nice but might bear fruit that is highly toxic."

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Lacey Douglas, administration manager at The Heather's Nursery in Norwich, said early years underfunding was "huge - it's a massive issue".

She added: "We know that Norfolk had the fourth largest underspend.

"It's heart breaking. There are sessions that are closing today because they can't afford to carry on after half term.

READ MORE: Fears early years education in 'dangerous position' as £2.5m funding diverted

"For people who lost their jobs over the last couple of years, if the underspend had not happened they might not have lost their jobs.

"That money belongs to Norfolk's two year olds and we desperately need it.

"Childcare is expensive - you cant do childcare cheap.

"You pay more for someone to walk your dog then to look after your child."

But John Fisher, cabinet member for children's services, said: "The county council has not kept more than 5pc of the funding, as claimed.

"However, we will be meeting Ms Douglas along with other providers working in early years to discuss funding issues.

"We completely recognise the ongoing funding pressures facing early years providers in the county and are talking to the DfE about this issue and what we can do to support our youngest children.

"However, this issue alone will not solve the ongoing pressures on early years providers or on the overall schools' budget.

"This needs a solution from central government, and we will continue to make the case for better funding for Norfolk."

And a DfE spokeswoman said: "We are increasing high needs funding for local authorities by £780m next year, boosting the total budget for supporting those with the most complex needs to more than £7bn in 2020-21.

"No child should be held back from reaching their potential.

"Our SEND review will look at how we can improve the support children and young people with SEND currently receive so the system works for everyone, in every part of the country."

READ MORE: Fears early years education in 'dangerous position' as £2.5m funding diverted

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