Agenda item

Report from the Principal Finance Officer (Schools Finance).

Recommendations:

That Schools Forum:

1.      Note the latest DSG funding for schools for the 2026/27 financial year.

2.      Note the forecast positions of Rotherham’s maintained schools and the centrally retained DSG budgets for the year.

3.      Note the government changes to Free School Meals from September 2026.

Consideration was given to the Report presented by the Head of Finance (CYPS) which provided Forum Members with an update on the schools funding for 2026/27 and the latest monitoring position for the Local Authority maintained schools budgets and centrally retained Dedicated Schools Grants (DSG) budgets.

The Head of Finance (CYPS) drew Forum Members’ attention to the following points:

·       The latest confirmed DSG funding allocation for Rotherham for 2026/27 in July was £127.69m, which includes a total of £24.60m in Schools Block funding for the LA maintained schools. The July DSG allocation reflected a recoupment adjustment of £24.60m relating to academies, which was a cost neutral adjustment.

·       There was an overall reduction of £1.16m in High Needs block funding allocations. This had been driven by import/export funding adjustments for pupils placed in other local authority areas and a reduction relating to the recoupment for high needs places in academy trusts funded directly by the Department for Education (DfE).  

·       The latest forecasted position across all centrally retained DSG budgets highlighted a forecasted deficit position for the High Needs Block budgets of £6.41m. This represented an increase compared to the planned approved deficit for 2026/27 of £5.5m.  The forecast deficit was mainly due to the following: inflationary costs; increase in EHCP pupils in mainstream and special schools; and continuing placements in out of authority independent settings.

·       The financial support previously provided through the government’s Safety Valve Agreement ended in 2025/26. This support had been replaced with a High Needs Stability Grant, which would fund 90% of DSG deficits accrued by local authorities up to 31 March 2026. Access to this grant would be conditional on approval of Rotherham’s Local SEND Reform Plan. The amount of this funding was therefore yet to be confirmed but it was anticipated that the DfE would provide financial support to local authorities for the current financial year, potentially through an extension of the High Needs Stability Grant.

·       Without Government funding or support, it was reported that the DSG reserve was forecasted to reach a cumulative deficit of £9.3m by the end of 2026/27.

·       The latest forecasted position of the 20 local authority maintained delegated school budgets indicated a decrease in surplus balances of £0.46m compared to the 2025/26 final outturn position. There was a net decrease of reported balances of £0.14m compared to the original budget.

·       The latest position of a school operating with a licensed deficit continued to be closely monitored and the school was reported to be projecting a slight surplus for 2026/27.

·       The pay award had been confirmed at 3.3% for non-teaching staff, which was higher than the 2% that schools had been advised to set in their budgets. Work was being done with schools to mitigate the impact of this increase.

·       The expansion of Free School Meals (FSM) eligibility had been introduced, which created two new categories of benefits-based FSM - targeted and expanded.

·       The government was offering an Expansion Grant to meet the increased costs of providing FSM. This amounted to £505 per pupil per annum but would be calculated again at the 2026 census date, which had been extended to 1 November 2026.

Forum Members commented that the expansion of eligibility for Free School Meals, whilst a welcome development, had pushed a significant amount of work back to schools. Forum Members commented that the funding formulas were unclear and the messages delivered to parents via the media had been inaccurate and unhelpful. It was also felt that the level of funding at £505 per pupil per year would not cover the cost of providing a meal each day, which would lead to significant uncovered costs for schools.

Forum Members commented that it would be helpful if the Revenue & Benefits department at the council could share information with schools to assist with identifying families who could benefit from FSM. It was confirmed that work was being done with the relevant council departments and the Department for Work & Pensions to better share information. It was acknowledged that this was more challenging for nursery settings where auto-enrolment was not compulsory prior to 5 years old. These settings therefore relied more on parents coming forward for FSM funding.

Forum Members sought reassurance regarding the potential cumulative deficit of £9.3m, if no further government funding was made available. It was explained that most local authorities were feeling anxious around their current deficit position and were waiting for confirmation from the DfE regarding future funding support. It was anticipated that extra funding granted via the Local SEND Reform Plan would ease the pressure in the medium-term. The council was anticipating a response from the DfE on the submitted Local SEND Reform Plan imminently. Forum Members were informed that Rotherham’s deficit was currently the lowest reported in South Yorkshire.

Resolved:

That the Schools’ Forum:

1)    Noted the latest DSG funding for schools for the 2026/27 financial year.

2)    Noted the forecast positions of Rotherham’s maintained schools and the centrally retained DSG budgets for the year.

3)    Noted the government changes to Free School Meals from September 2026.