The voice of specialist education

Finance and funding

High needs funding

The high needs funding system was introduced in 2013/14, a year prior to the Children and Families Act. A high needs student is defined as a young person who requires additional support costing over £6,000.

There is a close but not 100% correlation between those students with EHC plans and those who attract high needs funding.

Almost all students – about 5,200 – in specialist colleges fall into the high needs group.

Funding components

The high needs funding system has the following components:

  • Element 1 is the basic funding formula for 16 to 19 year olds, and 19-25 year olds with an EHCP
  • Element 2 is £6,000 of support
  • Element 3 is additional (top up) funding to pay for further support costs.

E1 and E2 are paid directly to colleges by the ESFA, using data from the previous year’s ILR returns to determine numbers. These two elements are called place funding, not linked to individual students. E3 is paid by the local authority agreeing the placement with the college.

LA Contracts

For each student attracting E2 and E3 (sometimes called Top-Up funding, paid directly by LAs), the college will need to agree a contract with the commissioning local authority. Natspec recommends the use of the national schools and colleges contract, agreed between NASS, Natspec, and local government organisations in 2013. Download the contract, including additional GDPR guidance, below.

Negotiating fees and procurement systems

Two reports prepared for Natspec by acl consulting are available to download below.

The first report, on negotiating fees, makes some suggestions for good practice that Natspec member colleges might adopt when negotiating student placements with local authority commissioners.

The main purpose of the report is to set out a systematic approach to programme pricing that should help ensure the fees charged to local authority commissioners by colleges are sufficient to cover their reasonable operating costs, including the significant fixed costs (management and other central staff, premises, utilities, etc.) that do not directly relate to an individual student’s programme.

The report does not recommend particular fee levels, or specify funding approaches, such as banding, and there is no (implicit or explicit) recommendation that fees may be or should be increased from levels previously set.

The second report relates to recent developments relating to procurement systems for high needs placements – specifically Frameworks and Dynamic Purchasing Systems. The report suggests a “light touch” method for LAs wishing to use such systems, and will be of interest to Natspec members currently participating in procurement systems or contracting with LAs that are considering such systems.

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