Preliminary advice on funding for maintained schools considering conversion to become an academy

This page outlines how maintained schools converting to academy status will be funded. It also sets out the principles of academies' funding and how it is calculated.

Ready Reckoner (2011/12)

The Ready Reckoner will enable schools considering conversion to academy status to calculate the level of funding they should receive as an academy, and allow them to compare this with the funding they currently receive. 

Principle of funding

Academy funding is based on the principle of equivalence. Academies should receive equivalent level of per-pupil funding as they would receive from the local authority (LA) as a maintained school. Academies also receive funding to meet their additional responsibilities that are no longer provided for them by the local authority.

The Government is clear that becoming an academy should not bring about a financial advantage or disadvantage to a school. However, academies have greater freedom over how they use their budgets, alongside the other freedoms that they enjoy.　

How funding is calculated

Unlike maintained schools that are funded on the traditional financial year basis (April to March), academies are funded from September to August to reflect the academic year.

The funding for academies comes primarily in the form of a grant, known as the General Annual Grant (GAG), paid by the Education Funding Agency (EFA).

The EFA will issue formal notification of grant funding for each school in the month prior to the date of conversion. This note explains how the grant will be calculated.

The GAG is made up of different elements;

  • School core funding - by far the largest element of GAG, known as an academy’s school budget share. This will be calculated on a comparable basis to maintained schools in the same local authority. YPLA make small adjustments to reflect any reduced business rates paid by an academy as a charitable trust, and for insurance, which is paid separately in GAG.
  • Local authority central spend equivalent grant (LACSEG) - this is additional money to cover the cost of education services that the local authority provides to its maintained schools but which academies are free to secure independently.

Important note: LACSEG is not a uniform figure across the country and will vary between local authorities to reflect the amount the local authority holds back to pay for central services. This element of the grant is calculated by the EFA using a formula based on an academy's pupil numbers and the amount that the relevant local authority spends on the services. It is not based on the actual costs of the services supplied to the individual school.

The relevant services and costs within LACSEG include:

Services and costs funded from a local authority's schools budget

Services and costs funded from other local authority sources
  • special educational needs (SEN) support services
  • behaviour support services
  • 14-16 practical learning options
  • school meals and milk
  • assessment of free school meals eligibility
  • repair and maintenance of kitchens
  • museum and library services
  • licences and subscriptions
  • central staff costs (maternity, long term sickness and trade union duties)
  • costs of LA　statutory/regulatory duties
  • asset management costs
  • school improvement services
  • monitoring national curriculum assessments
  • education welfare services
  • pupils' support (e.g. clothing grants)
  • music services
  • visual and performing arts services
  • outdoor education services
  • certain redundancy and early retirement costs.

Academies need to consider how they will obtain these services using the additional funding they receive. They are free to buy back the services from a local authority or find them elsewhere. Depending on which local authority the academy is in, it might be the case that the school is already responsible for some services, and already receive money rather than services from their local authority.

The technical note on LACSEG provides further information about the way in which LACSEG is calculated for all schools seeking to become academies, including special schools.

Local authority services

The following items do not become the responsibility of the academy and continue to rest with the local authority. These are:　

  • home to school transport (including SEN)
  • education psychology, SEN statementing and assessment
  • monitoring of SEN provision, parent partnerships, etc.
  • prosecution of parents for non-attendance
  • individually assigned SEN resources for pupils with rare conditions needing expensive tailored provision (this is usually a top-up to formula funding)
  • provision of pupil referral units or education otherwise for a pupil who is no longer registered at an academy.

HMRC VAT Scheme

The Finance Bill 2011, which received Royal Assent in July 2011, made provision for a VAT refund scheme for academies. Under the scheme, academies’ non-business VAT costs are reimbursed by HMRC through a refund scheme similar to the scheme that applies to local authority maintained schools.