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High needs funding
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Alternative provision funding
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Schools for excluded children compete with special schools for funding from the government’s high needs budget. The National Audit Office recently described this situation as financially unsustainable.

What’s more, there is huge variation in per-pupil spend across the country with no standardised service delivery model and no guaranteed outreach budget to work with mainstream schooks.

And, in some areas, there are financial incentives for schools to exclude rather than to support children at risk of exclusion.

What are we asking for?

The government is currently reviewing the high needs budget. In doing so, it should work with mainstream, alternative provision and special schools and local authorities to develop a national funding formula that guarantees equitable treatment for all excluded pupils and those at risk of exclusion, is sufficient to cover all the services required, and is consistent across England.

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Alternative provision needs consistent, reliable funding in 3 areas

Upstream working

Every area of the country needs funding to support children at risk of exclusion to stay in school and thrive. Early intervention is better for pupils and more cost-effective in the long-term.

Core costs

Alternative provision schools should be funded equitably and adequately to provide high quality education. Funding per pupil varies significantly across the country but a lack of transparency makes it impossible for researchers to analyse how funding correlates with quality of education.

There is no statutory duty on local authorities to continue alternative provision after the age of 16, yet half of excluded children drop out of education immediately after their GCSEs. Funding is needed to support these young people to continue in education, employment or training.

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“Pressures are making the system less, rather than more, sustainable.”

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National Audit Office

An unsustainable funding system

A report published by the National Audit Office in 2019 found that the system for funding alternative provision and specialist provision was “not, on current trends, financially sustainable.” They revealed that many local authorities are failing to live within their high needs budgets and meet the demand for support.

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High needs budget

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    Between 2013–14 and 2017–18, high needs funding per pupil fell by 2.6% in real terms, according to the National Audit Office (NAO).

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    In 2017–18, four in five councils overspent on their high needs budget, NAO research revealed.

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    The government has promised an additional £780m one-off funding package, but councils and specialist organisations have warned this is not sufficient to make up historic deficits.

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    The NAO found that pupils with special educational needs who do not have education, health and care plans are “particularly exposed”. This is the case for seven in ten pupils in alternative provision, one in ten in mainstream and zero in special schools.

Eliminating perverse incentives

Permanent exclusion

In most parts of the country, it is cheaper for a school to permanently exclude a pupil than it is to fund preventative support in their education setting. The funding system should be redesigned to ensure that decisions are driven by pupils’ best interests, not funding pressures.


Funding arrangements sometimes incentivise alternative provision schools to hold onto pupils when reintegration might be in their best interests. Research suggests work remains to be done to redress this balance, and the Timpson review echoed these findings.

Opening new schools

Special free schools are funded centrally whereas local authorities must pay for places in alternative provision free schools. This process creates financial incentives for local authorities to bid for special free schools over alternative free schools, regardless of local need.

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