School Funding Formula | Consultation

Update and Consultation – Schools Funding 2026/2027

1. Introduction

This consultation seeks views on the proposed 2026/27 schools funding formula implementation including changes to the capping used to balance the overall schools budget and indicative block transfers. The consultation also covers options for de-delegated budgets for maintained schools only.

Local authorities are required to submit an annual schools funding formula to the Education and Skills Funding Agency (ESFA) which details the funding model agreed with its schools forum and the individual school budgets derived from the formula for maintained and academy schools.

Feedback from this consultation will be provided to schools forum members to aid decision making at future meetings.

Due to the complex nature of some of the proposed changes, the authority will be hosting two online briefings for headteachers and finance officers. These sessions will be held prior to the consultation closing date and will provide an overview of the consultation with a focus on the current funding formula, its impact on schools funding and proposed changes for 2026/27, and an opportunity for any questions and feedback. Dates and times of the meetings will be confirmed with schools separately via the schools platform https://www.schools.cornwall.gov.uk/

Any questions regarding the consultation can be emailed to dean.mitchell@cornwall.gov.uk

2. Context

The calculation of school level budgets is undertaken using the DfE’s National Funding Formula (NFF). The NFF uses set factors and funding rates prescribed by the DfE and updated on an annual basis. The formula also includes minimum per pupil rates and minimum funding guarantees to protect schools from dropping below set funding levels.

The long-term goal of the NFF is to ensure that schools across the country are funded on a fair and equitable basis. While the current NFF model does offer a standardised methodology for calculating budgets, the difference in funding allocated to local authorities means there remain significant variations in school and per pupil level funding nationally. The latest iteration of the NFF was implemented in Cornwall over a 3-year period from 2018/19 with the full set of NFF factors and rates in place from 2020/21.

While we are required to use the DfE’s NFF to calculate budgets, there does remain limited local discretion in several areas:

• Funding rates – Local Authorities are currently considered compliant if they set funding rates for each factor plus or minus 2.5% from the published rates. As the DfE look to move all authorities closer to the NFF this flexibility may reduce in future years.
• Minimum Funding Guarantee (MFG) – The MFG is used to protect the amount of funding schools receive per pupil compared to the previous year. The range is set by the DfE and is determined by the overall uplift in schools funding nationally.
• Capping and Scaling of budgets – These mechanisms are used to balance the overall cost of school budgets to the available grant. The cap on per pupil increases is also referred to as the ‘gains ceiling’.
• Exceptional Circumstances – These are non-standard factors that local authorities are required to apply to the DfE to use.
• Block transfers – Local Authorities have limited ability to move funding between Dedicated Schools Grant (DSG) blocks with the appropriate schools forum approval.

These areas require Local Authorities to consult with schools prior to recommending proposals for schools forum to consider and vote on.

3. Operational Guidance and Timeline

At the time of writing the DfE have not yet released the 2026/27 funding regulations or DSG funding settlement. To allow basic planning, they have confirmed funding arrangements from April 2026 will largely mirror the current guidance.

Due to the above, it should be noted that the content of this consultation is subject to the final grant regulations for 2026/27 which are due to be published in the autumn term. The financial implications of proposed changes are also modelled based on the 2025/26 school block DSG allocations and the notional impact to current school budgets. It should be noted these are for illustrative purposes only, with any agreed changes being implemented for 2026/27 (April 2026 for maintained schools & September 2026 for Academies).

As in previous years, any grants currently paid to schools outside of the funding formula will be mainstreamed in the NFF for 2026/27. This will include the schools budget support grant (SBSG) and the National Insurance contributions (NICs) grant.

We have also received confirmation that the extension of free school meals to all children in households eligible for universal credit will be funded via a separate grant for 2026/27 and not the NFF.

Local authorities will be required to submit their final funding formula for 2026/27 in January 2026. Before this can happen, there are a number of steps we need to take:

4. National Funding Formula – Proposed 2026/27 Implementation

Block Transfer

Local authorities can transfer up to 0.5% of the schools block of DSG to support other DSG blocks, subject to schools forum approval. In previous years, the authority has requested the maximum transfer to support central budgets that benefit all schools and high needs provision.

The transfers agreed for 2025/26 were allocated as set out below:

Cornwall operates a non-statutory funding mechanism to support schools with a higher than average number of pupils with an EHCP – the High Needs Protection (HNP) formula. This is on the basis these schools will have higher element 2 costs which may not be covered by funding within their budget share. The current schools forum approved mechanism has been in place since 2018, and itself replaced a previous formula based on high incident low cost SEND pupils.

The HNP formula allocates an additional £6,000 for each full-time equivalent pupil with an EHCP above the set threshold, based on the percentage of such pupils in the school population. The starting point for the thresholds used are the national averages published by DfE for primary and secondary phases of education. Where it is forecast these thresholds will result in an overspend, we apply a proportional uplift with the thresholds reviewed on a termly basis. Current thresholds are 3.43% primary and 3.09% secondary.

The HNP formula partly addresses the disconnect between the SEND funding received as part of a schools budget share, referred to as the notional SEN budget, which is based on proxy measures of SEND such as Free school meals, and the actual costs incurred by schools.

Using the block transfer from schools provides a measure of equalisation by directing additional funding at those schools with the highest percentage of EHCPs, however we do note that the cost of doing this is not uniformly applied due to the capping to select schools to balance the overall schools budget.

A breakdown of forecast allocations by number on roll is shown in Table 3 below:

Table 3 - High Needs Protection Allocations

For 2026/27 we are proposing to continue with the 0.5% transfer as set out in Table 2. Where these transfers are not supported by schools and schools forum, budgets may cease. The authority also has the option of appealing the decision to the Secretary of State if it believes it is in the best interests of schools and high needs provision in Cornwall.

It is expected the SEND reform white paper due in the autumn term could have significant implications for the funding and education of mainstream pupils with SEND. As such the authority expects to review the operation and impact of the HNP, along with other mainstream high needs resources such as element 3 top up funding once the details are known.

It is anticipated any proposed changes at the local authority level would be implemented from 2027/28, although this is subject to the outcome of the white paper and timing of any regulatory changes. It is also likely that any revised approach will require schools forum agreement and as such we would expect to engage all schools on proposed changes via this annual consultation process.

Schools should consider the proposal for block transfers alongside the options for capping and scaling as any transfer of funds out of the schools block further contributes to the amount of funding we are required to cap from schools.

Capping and Scaling

The DfE calculate the overall schools block of DSG for each local authority by multiplying the authorities primary and secondary units of funding by the number of pupils recorded on the October census. The units of funding for each authority are determined by the DfE and are influenced in part by historical spend and funding levels. In addition to the pupil led funding the DfE also allocates resource to support premises costs and pupil growth.

Cornwall’s funding for the schools block of DSG sits below the national average per pupil. As a result, the current cost of implementing the NFF exceeds the available grant precluding full alignment. To address this, we apply an annual cap on per pupil increases compared to the previous year’s allocation. For 2025/26, this was set at 1.49%.

For many schools this results in a budget allocation that is below the notional amount allocated via the NFF. For the current 2025/26 funding year, it was necessary to cap £4m from 129 schools (this figure includes the agreed 0.5% block transfer from schools of £2.1m).

Schools not subject to capping receive their NFF allocation in full, as their per pupil increase falls within the minimum funding guarantee (MFG) of 0% and the gains ceiling of 1.49%. Where necessary, MFG protection ensures schools do not receive less per pupil than in the previous year.

Table 4. 2025/25 NFF Capping

The impact on individual schools varies depending on the size of the school and how previous funding formulas have allocated funding. What is apparent from reviewing the current and prior year allocations is that small primary schools are particularly affected with 76 schools (88%) with fewer than 100 pupils receiving some level of capping.

Smaller schools have benefited from a significant increase in the universal lump sum since 2017/18, with a number also receiving additional funds from the sparsity factor which support small, rural schools. These factors have ensured that smaller primary schools continue to receive the highest overall funding per pupil, albeit not at the level the notional NFF allocates.

It is important to note that capped amounts represent the difference between the NFF notional allocation, and the actual allocation received by the school, they do not constitute reductions from the previous years funding which is protected by the MFG.

Although some level of capping has been applied to schools budgets since the NFF was introduced in 2018/19 it was expected that the DfE’s move towards ‘fair funding’ would eventually ensure Cornwall’s DSG allocation was sufficient to cover the cost of the NFF. This has clearly not happened, and while the total capping in 2025/26 is down on the previous year, it is still higher than in any other year since 2018/19.

Alternative Approach

Local authorities can use approaches other than applying a cap to schools to align the cost of school budgets with available grant. These include adjusting factor values, within the range set by the DfE, and applying capping and scaling to per pupil gains. Both methods create additional headroom within the formula, which can then be redistributed to schools that are not yet fully funded at the NFF.

The use of capping and scaling allows for a reduced cap to be set, with gains and losses above the cap scaled back. For instance, a cap of 1% with a scale of 50% would halve any funding gains and losses above 1%. The same overall budget is allocated across schools but the inclusion of the scale would allow schools not funded at the NFF to receive a higher per pupil increase, accelerating the rate at which these schools move towards full adoption of the NFF funding rates. This acts as a redistribution mechanism, with schools funded at the NFF seeing their gains reduced in order to cover the cost.

Any adjustments that are implemented cannot result in a school falling below the MFG or minimum per pupil rate set by the DfE. To ensure schools do not see a reduction in year on year funding the authority will continue to recommend schools forum agree the MFG is set at 0% (the maximum allowable in 2025/26).

We recognise that many schools are facing challenges in setting their budgets, and that being funded at the NFF (not subject to capping) does not remove financial pressures. For this reason, the authorities preferred approach is to make incremental changes over the medium to long term. While potential adjustments at a school level are not significant initially, the changes are built into the schools baseline funding and will have a compounding effect over several years.

Options

In December 2024, two mechanisms were presented to school forum to address the lack of progress towards the NFF for some schools:

1. Cap and Scale – as noted above this would set a limit on the amount any school can gain per pupil and scale any gain or loss above this.
2. Reduction to Basic Entitlement factor plus Cap and Scale – This mechanism would see the basic entitlement factor reduced for both primary and secondary schools by an agreed percentage, with the capping and scaling method above used to balance the overall budget.

It was agreed that due to the complex nature of the changes and the impact on schools, a working group would be established to review the implementation of the proposed options.

Feedback from the group, which met in July 2025 to review the options and school level impact, showed a preference for mechanism 2. The inclusion of the basic entitlement reduction spreads the cost of the change across a wider number of schools meaning the negative impact on any one school is reduced. It is this mechanism that is presented below for schools consideration.

The authorities recommendation is a 0.25% reduction to the basic entitlement rates. Current regulations would allow for a higher adjustment; however, this requires further reductions in funding for some schools. We also have to consider that as the reduction increase, the MFG will start to recycle more of the headroom created back to the same schools to ensure minimum per pupil funding levels and the MFG regulations are being met.

Had the 0.25% change been implemented for 2025/26 this would have resulted in the adjusted per pupil values shown in table 5.

Table 5. Basic Entitlement Rate Adjustments

The headroom this creates in the formula is combined with the funds generated by the cap, which reduces the per pupil gain for some schools, to be distributed by the scaling factor. The higher the cap is set the more each school per pupil uplift is protected, naturally resulting in a lower amount to be redistributed.

The following table shows an example of how this adjustment would have impacted two schools in the current year had this mechanism been implemented. It assumes the 0.25% reduction in basic entitlement funding plus a cap set on per pupil increases of 0.80% (down from the actual 1.49% used in 2025/26). This allows for gains and losses above the 0.80% to be scaled to 75.84%.

It shows school ‘A’, where the actual per pupil increase of 1.16% was within the 0% MFG and gains ceiling of 1.49%, seeing a reduction in funding of £3,433 once the change has been implemented.

School ‘B’, where the NFF per pupil increase of 27.86% was reduced to 1.49%, sees an increase of £11,679 due to the impact of the scaled back loss above the 0.80%. This gives school ‘B’ a revised cap of 7.27% per pupil.

Table 6. 0.25% Basic Entitlement Reduction with Capping and Scaling

Three versions of this mechanism, with varying levels of capping and scaling, were modelled for the schools forum working group to consider. These are shown below along with a summary impact for schools by phase of education (compared to the actual 1.49% cap applied in 2025/26).

Table 7. Capping and Scaling Rate Options

The amount of funds moving between schools would range from £0.585m to £1.037m depending on the option agreed. In all options the proposed transfer of funds between schools represents less than 0.3% of total funding.

Appendix 1 available to view to the right includes a more detailed breakdown of the impact for each option grouped by the number of pupils on roll.

The consensus of the schools forum working group was that option 1 offered an appropriate balance between starting to transition those schools subject to capping towards the NFF at a faster rate, and ensuring that schools funded at the NFF, who would see reductions in funding, are not unduly impacted. Option 1, if it had been implemented for 2025/26, would have seen no school lose more than 0.3% compared with their actual budget allocation.

As the above modelling has been undertaken using the current 2025/26 NFF rates and guidance, any changes agreed for 2026/27 would be implemented to mirror the impact shown here as closely as possible. This would include ensuring that no school saw a budget reduction above that specified in the chosen option as set out in appendix A.

Schools continue to have the option to not change the current system. This would mean that schools not currently funded at the NFF would continue to see their movement towards the full NFF limited to the cap set to balance the overall schools block.

Should schools forum vote to adopt one of the proposals presented, the LA would expect to seek annual agreement on the method used based on updated impact assessments which will consider any significant changes in funding or regulation. This information would also be shared with schools via the annual consultation process.

5. Exceptional Circumstances Factors

Cornwall uses two exceptional circumstances factors in its funding model. These are funding streams within the NFF that sit outside of the mandatory factors and are agreed by the DfE on a case-by-case basis through the disapplication process. To continue using these factors we require schools forum approval.

• Rents - this factor supports schools with additional rent costs. It is forecast to allocate a total of £110k to 5 primary schools who can evidence additional rent costs attached to classroom buildings, land, and the use of sports facilities.
• Additional Sparsity - allocates a lump sum of £50k to small secondary schools meeting the existing sparsity factor criteria and where the pupil numbers on roll are below 350. There is currently one school receiving funding from this factor and this is expected to continue in 2026/27 (total £50k).

The deadline for schools wishing to respond is Friday, 3 October 2025 (5.00pm)