School governor and former headteacher Peter Downes takes the long view on what ‘local management’ set out to achieve 25 years ago and where he believes it has gone partially wrong

In 1982 Cambridgeshire set up a pilot scheme for what it called ‘Local Financial Management’ (LFM). Six secondary schools and one primary were allocated, as a lump sum, the money they would have had spent on them by the LEA but were given the freedom to spend it as they wished. The aims of LFM, as we saw it at that time, are listed in the panel alongside. The political motivation was cross-party. The Cambridgeshire Conservatives saw it as a way of cutting out bureaucracy and keeping down the cost of education; the Liberals welcomed it as an embodiment of their basic belief in devolving decision-making down to the lowest level. The Labour Party at that time opposed it on the grounds that it might reduce the bargaining power of the unions, diminish the role of the LEA and exacerbate the gap between the popular and unpopular schools.

The overall aims were:

  • to enable the governors and head of each school to make the most effective use of the resources available to them
  • to give each head flexibility, within an agreed budget, to manage the school
  • Some secondary objectives were:
  • to give schools a sense of autonomy and institutional pride because the LEA could delegate financial responsibility to them
  • to increase job satisfaction for heads in making local decisions
  • to develop the power of virement, moving money across traditional headings, to meet the school’s needs better
  • to improve flexibility and speed of management decisions
  • to provide an incentive to behave in a cost-effective way and reduce waste
  • to encourage schools to be entrepreneurial in extending the use of their premises and thereby increasing income which they could retain

At school level, it was an exciting and challenging time for heads and governors. We all worked very hard to make it a success. We had to learn about aspects of our school we had never given much attention to before. The pilot scheme was a four year project (yes, it really was four years!). Nowadays pilot schemes are much shorter and have usually been ‘rolled out’ even before they have been evaluated. LFM was evaluated and deemed to be a success, although I have to admit, looking back, that we did not have sufficiently detailed performance data to be able to say that it had made a measurable difference to the academic or social outcomes of pupils. The perceived success of LFM attracted the attention of the Conservative government of the day and they developed it into Local Management of Schools (LMS). This became the national model, implemented  from 1988 to 1990, first in the secondary sector and then in the primary. The free market philosophy, together with the Conservative government’s distrust of LEAs, brought about the next stage of even greater autonomy, the grant maintained school. The promise of substantial extra funding, removed, notionally, from the central costs of LEAs, lured many secondary schools out of the LEA system and increased the disparity of funding between schools. GM schools had not only an enhanced budget but even greater freedom to do their own thing, including attracting more able and better motivated pupils. This was the beginning of the marketisation of education which, nowadays, is accepted as a given by both major parties under the banner of ‘diversity and choice’. A parallel, and in a sense contradictory, trend was the government’s unease about giving schools too much freedom. With all this new-found autonomy, how could they be held to account? The creation and imposition of a national curriculum, followed by a national inspection regime, standardised testing and increasing public pressure for raising standards, came to dominate the educational world during the 1990s and has intensified even though a government of a different political colour came into power in 1997. In order to be able to demonstrate that central government was effective in taking a lead to raise standards, new systems of funding were developed to target funds to whatever the government wanted to say it had achieved. The Standards Fund, for example, started as a relatively modest supplementary grant but gradually became a powerful tool to channel funding to meet government priorities. By the mid-1990s, seeking extra funding from outside sources, the ‘bidding mentality’, became commonplace. At one point I calculated that there were 70 different sources of funding available to secondary schools if they had the time and inclination to bid for them. The change of government in 1997 brought about further developments in the way schools are funded. Under the banner of ‘Fair Funding’, LMS underwent a makeover, emphasising the following key words: a. Standards matter more than structures and schools should focus on better results. b. Accountability – funding aligned to responsibilities and LEAs held to account for the spending of public money. c. Self management was reaffirmed as the way forward (former political doubts having disappeared). d. Transparency demands that school financing should be clear and comprehensible. e. Opportunity will offer schools greater freedom without threat. f. Equity – fair and equal treatment of all schools. g. Value for money – this became the new Holy Grail of inspection although, in practice, it is difficult to establish the criteria and measure performance outputs against funding inputs. A concern that surfaced fairly soon after the generalisation of LMS was that very few people could understand how the government decided what grant it gave to LEAs for their schools. As heads and governors became more self-confident in their handling of money, they began to ask themselves some more fundamental questions about how the quantum they were given was arrived at. They discovered that very similar schools, ie with the same number of pupils and similar socio-economic conditions, in different LEAs would get very different allocations, sometimes amounting to variations of hundreds of thousands of pounds. Clearly, some of this would be due to the political decisions made by local councillors and the level of local rates but, as most of the grant came from central government, why were the discrepancies so great? This concern, initially articulated by the Secondary Heads Association (now re-named the Association of School and College Leaders), was taken up across the educational community and led to the government’s Educational Funding Strategy Group (EFSG), bringing together the DES (as it then was), the Treasury, local authority officers and the Local Government Association, all the teaching unions and associations, and governor and parent representatives. The EFSG probed deeply into educational funding, even provoking one very senior government official to admit that he was discovering things he had never previously understood. The work of the EFSG set the framework under which schools and LEAs currently operate. There is much greater clarity than before; many funding streams have been amalgamated; the money for schools is ring-fenced (Dedicated Schools Grant) from the money for other LEA services for children and young people and from wider council expenditure. The groups participating in that work continue to meet regularly with government to refine and improve the funding system. The EFSG failed to achieve one of the hopes that heads and governors had for it – the establishment of a national funding formula which is based on the identified needs of pupils and the expected level of service to be provided. The achievement of an Activity Led Formula (ALF) remains a future target. Recently there have been signs that the tide of autonomy is beginning to turn. The government is threatening to require LAs to claw back those elements of a school’s unspent balances that are not ear-marked. This is because of the size of balances held by schools, even though they constantly complain about being hard up. The weakness in this approach is that schools rightly plan ahead and save up for major developments in the future. The government argues that money allocated should be spent on the pupils actually in the school at the time, not hoarded against a future rainy day. A second sign of LMS going out of fashion is the use of the Private Finance Initiative in building new schools and renovating existing ones. Many of these PFI contracts specify that the cleaning, maintenance and management of the buildings will be carried out on a long-term contract by external companies ‘so that the head and governors can concentrate on their primary objective of raising standards for pupils’. This takes a substantial slice of the school’s budget out of local control and returns us to pre-LMS days, except that, at that time, it was the LEA that provided those services. In summary, local management has brought, on balance, several advantages for schools. It has involved governors much more intimately in the running of the school – you make decisions much more carefully when you know what they cost. It has made everybody much more aware of how to function economically. It has increased the pressure on everybody in the funding chain, from the classroom to the government, to be more open and explicit in their handling of money. But some of its intended outcomes have been subverted by contradictory developments. The overriding desire of successive governments to keep a tight grip on education has shackled the freedom of governors to provide the funding to encourage their schools to innovate. It has all become heavily bureaucratic and I can’t help feeling, though I don’t know how we could prove it, that the amount spent on bureaucracy has not diminished. The governors of 25 years ago were pioneers. Governors today face new challenges and priorities, listed below. There is no turning the clock back but I hope that the government will allow systems to settle for a few years. The incessant need to produce new initiatives is a distraction for those of us who have the best interests of children at heart.

Peter Downes was Head of Hinchingbrooke School, Huntingdon in 1982, is now retired, and a county councillor and school governor Challenges for governors in 2008 and beyond

  • Keep up the level of financial knowledge in the governing body as new governors are recruited by attending training courses.
  • Ensure that sound management procedures are in place but don’t get obsessed with protocols and processes.
  • Keep asking the question – will this decision make things better for the children?
  • Work hard for your school but remember that you are part of a national education system so don’t do things to disadvantage others financially.
  • Try as far as possible to spend what you have been allocated on the pupils currently in school but have an eye to the future as well. Argue the case for a prudent balance.
  • Keep up the pressure on government for a fairer funding system based explicitly on needs and activities.