A common scenario in the First Tier Tribunal can be described as “the battle of the schools” and a couple of years ago a series of test cases reached the Upper Tribunal which looked in depth at the issue of weighing the comparative cost of maintained and independent school places, which is of great importance in determining whether an independent school place will be so much more expensive than a place in a maintained school that to prescribe the independent school in section I would be incompatible with the efficient use of resources.
The cases were reported under the title Hammersmith and Fulham LBC v L and 3 related appeals  UKUT 0523 (AAC) and in the reasons Mr Mitchell stated:
4 These reasons set out in some detail how the maintained school funding legislation for England operates and how the case law about comparing the costs of rival schools has developed. These are relevant issues for these appeals. Furthermore, an inordinate amount of time has clearly been spent across England in arguing about and trying to understand these matters. I hope that this reasonably comprehensive treatment of, or reference point for, the topics will reduce that and, to some extent, free up education resources to be used elsewhere.
The summary of his reasons (and in a sense, you do not have to read beyond these paragraphs) was put as follows:
6 I will set out now a summary of my decision on the key issues. This is, however, only a summary.
7 Generally, a comparative cost analysis of an independent school and a special school, for the purposes of section 9 of the Education Act 1996 (EA 1996), is to proceed on the basis that, where the special school has a vacancy, its place funding is not to be treated as an additional cost. The same approach is to be taken when comparing the costs of an independent school with a maintained school with SEN-reserved places (a specialist unit). In both cases, AWPU-funding (Age-Weighted Pupil Unit) is irrelevant (there is no AWPU). But, in line with the Court of Appeal’s decisions in Oxfordshire and Kent , local authority ‘top-up’ funding for the child’s placement is an additional cost to be taken into account.
8 Where the choice is between an independent school and a maintained mainstream school without reserved places, the AWPU normally represents an additional cost for the purposes of section 9 , in accordance with Kent . Further, any additional funding required in order to meet the child’s needs is to be taken into account as required by both Kent and Oxfordshire .
The actual decisions were taken in the context of former regime which pre-dated the Children and Families Act 2014, so hence were concerned with statements of special educational needs, rather than EHC plans. However, given the similarity between sections 33 and 39 and their predecessor sections in the former statutory regime, the analysis below, which I include in depth below remains useful and relevant.
The analysis (or history starts with Part IV of the Education Act 1996:
29 Part IV of the EA 1996 , which is devoted to special educational needs, forms part of a detailed and inter-locking scheme for the provision of primary and secondary education by the state. “Primary education” and “secondary education” are defined by section 2(1) EA 1996 with the effect that education must be “suitable to the requirements” of a particular child.
30 Each of the present children has SEN within the meaning of section 312(1) EA 1996 namely “a learning difficulty which calls for special educational provision”. That provision is “educational provision which is additional to, or otherwise different from, the educational provision made generally for children of his age in schools maintained by the local authority (other than special schools)” ( section 312(4) ).
31 For a child with a statement of SEN, a legislative presumption favours mainstream schooling. Section 316(3) EA 1996 states a child “must be educated in a mainstream school unless that is incompatible with (a) the wishes of his parent, or (b) the provision of efficient education for other children”. Every school is a mainstream school unless it is of an excepted type such as “a special school” and most independent schools (but not Academies) ( section 316(4) ). None of the present independent schools are mainstream schools. A special school is a school that is (a) specially organised to make special educational provision for pupils with SEN and (b) is maintained by a local authority or is an Academy or a non-maintained special school ( section 337 ).
32 Section 324 EA 1996 requires a child’s statement of SEN to detail the local authority’s assessment of the child’s SEN and specify “the provision to be made for the purposes of meeting those needs” ( section 324(3) ). The type of school considered appropriate must always be specified ( section 324(4)(a) ) and, normally, a specific school must be as well. In the prescribed form of statement, Part 4 is the place to specify a school.
33 A local authority must “arrange that the special education provision specified in the statement is made for the child” ( section 324(5) EA 96 ). This is only avoided where “the child’s parent has made suitable arrangements”. Where an independent school is specified, the authority must pay the whole of the fees for the child’s education ( section 348 EA 1996 ).
34 Section 326(1A) EA 96 provides a right of appeal to the First-tier Tribunal against, amongst other things, “the special educational provision specified in the statement (including the name of a school so specified)”.Section 326(3) permits the Tribunal to order the local authority to amend the specified provision although a particular school can only be ordered in limited cases, including where a school was proposed in the proceedings by any party ( section 326(4) ). All the present independent schools were proposed, one way or another, by the parents in the relevant Tribunal proceedings.
35 When the Tribunal comes to make its decision, it is “bound at that stage to look at the overall picture as to the particular special needs of the child at that time. It is not for the tribunal simply to address the issues as at the stage when the statement is drawn or when the appellant lodges her appeal” ( Wilkin v Goldthorpe (Chair of the SEN Tribunal) CO/1251/97).
36 Schedule 27 to the EA 96 allows parents to express a preference for a particular maintained school, and confers connected rights and duties. While no parent in the present appeals sought a maintained school for their child, case law about Schedule 27 has had some influence on section 9 case law.
37 Schedule 27(3)(1) requires a local authority to make arrangements for enabling a parent, in various cases, to “express a preference as to the maintained school at which he wishes education to be provided for his child and to give reasons for his preference”. Where a preference is duly expressed, the school must be specified in the child’s statement unless either of the following apply:
(a) “the school is unsuitable to the child’s age, ability or aptitude or to his [SEN]”; or
(b) “the attendance of the child at the school would be incompatible with the provision of efficient education for the children with whom he would be educated or the efficient use of resources”.
It will be noted that the wording of schedule 27 is now to be found within section 39 of the Children and Families Act 2014.
Section 9 of the Education Act 1996 remains in force and is applicable:
38 Section 9 EA 1996 is the heart of this appeal. It reads as follows:
“In exercising or performing all their respective powers and duties under the Education Acts , the Secretary of State and local authorities shall have regard to the general principle that pupils are to be educated in accordance with the wishes of their parents, so far as that is compatible with the provision of efficient instruction and training and the avoidance of unreasonable public expenditure.”
(a) section 9 applies expressly to both a local authority’s powers and its duties. The powers and duties are those under the “ Educations Acts ” which are listed in section 578(1) EA 1996 . There must be hundreds of powers conferred and duties imposed by the Education Acts the exercise of which is capable of being influenced by section 9 . Thus it operates in a wide range of statutory contexts;
(b) the “general principle” is not absolute. It is qualified: “pupils are to be educated in accordance with the wishes of their parents” but only “so far as compatible with the provision of efficient instruction and training and the avoidance of unreasonable public expenditure”;
(c) “public expenditure” in section 9 encompasses “expenditure incurred by any public authority as a result of the discharge by the local authority of the education functions” ( Haining v Warington BC  AACR 28,  WLR(D) 152 );
(d) the proper application of section 9 will often call for relevant findings to be made and properly reasoned. There are no hard and fast rules given that each case is unique but in many Tribunal cases, where the application of section 9 is a key contested issue (as it often is), relevant facts need to be found. Typically, this will involve findings as to the additional costs for the local authority of the rival schools (the specificity of which will depend on the circumstances). If necessary (where the independent school costs more) the Tribunal’s next task involves an exercise of judgement in deciding whether, on the costs identified, a placement at the independent school would involve unreasonable expenditure. That judgement has to be adequately reasoned but, in assessing adequacy, it must be borne in mind that the Tribunal is making a judgement on a topic falling within its area of particular expertise;
(e) even if a parental preference, in whole or in part, survives the section 9 filtering process, it is not determinative. The parental preference principle is simply something to which regard is to be had. It is possible to have regard to the principle without implementing a parent’s wishes. As Denning LJ said in Watt v Kesteven County Council  1 QB 408 at 424:
“[ Section 9 ] does not say that pupils must in all cases be educated in accordance with the wishes of their parents. It only lays down a general principle to which the county council must have regard. This leaves it open to the county council to have regard to other things as well, and also to make exceptions to the general principle if it thinks fit to do so.”
And Lord Slynn giving the judgment of the House of Lords in Harrow made the same point, albeit this was probably obiter : “I do not consider that section 9 of the Act means that parental preference is to prevail unless it involves unreasonable public expenditure”.
40 That said, cases tend in my experience to be argued on the basis that, if there is no unreasonable expenditure, effect will be given to parental preference. The key point of dispute in most cases, therefore, is simply whether a parental preference would involve unreasonable public expenditure.
This issue is at the heart of many battles before the First Tier Tribunals. The judge then went onto consider how mainstreamed schools are financed:
41 “Unreasonable public expenditure” is a component of section 9 . Deciding whether public expenditure is unreasonable involves, in the present context, comparing the costs of a maintained school with those of an independent school. Whether or not a particular item is brought into account can have significant ramifications. Here, different First-tier Tribunals came to opposite conclusions about the significance of place funding yet all said their approach was called for the school funding regime. To borrow from Sedley LJ in Oxfordshire , it cannot be right for different Tribunals to come to different conclusions about the treatment of materially identical sums. One or other of the present Tribunals must have misunderstood the funding regime.
42 The present Tribunals derived their understanding of the school funding system from national funding guidance. They started in the wrong place. The correct place to start is the detailed legislative scheme for funding maintained schools. Guidance is of secondary importance simply because, unlike legislation, it is not a form of law (which is why my case management directions asked for submissions by reference to the funding regulations).
43 A local authority has a duty to maintain its maintained schools: section 22(1) School Standards and Framework Act 1998 (SSFA 98). This includes “the duty of defraying all the expenses of maintaining it” ( section 22(2) & (3) ). The duty is met, principally, through operation of the maintained school funding legislation.
44 The primary legislation is the SSFA 98 (as amended) and which is supplemented by the School and Early Years Finance (England) Regulations 2013 (S.I. 2013/3104) (“the funding regulations”). These Regulations applied to the financial year beginning on 1st April 2014 (the funding period). Below, references to regulations are to these regulations.
45 For every funding period, a local authority must allocate a “budget share” to a maintained school ( section 45(1) SSFA 1998 ). A budget share represents a sum of money. The budget share must be made available by the local authority “to be spent by the governing body” of the maintained school ( section 50(1) ).
46 Generally, budget shares are not hypothecated. Section 50(3) SSFA 98 provides that “the governing body may spend any such amounts as they think fit for any purposes of the school”. However, this is subject to any provision “made by or under the scheme”. This is a reference to the financial scheme which section 48 SSFA 1998 requires every local authority to have. Legislation does not require the whole budget share to be spent during the funding period nor, so far as I am aware, does it authorise clawback of un-spent sums. However, there appears to be scope for a financial scheme to adjust future years’ budget shares in the light of a surplus.
47 The funding regulations control a local authority’s determination of a maintained school’s budget share. A formula for determining budget shares must be set by the authority, before the beginning of the funding period ( reg. 10(1) ). The authority “must use the formula…in all determinations of school budget shares in respect of the funding period” ( regulation 10(2) ). Certain elements must be included within the formula. That is why, to an extent, one can normally be sure that a maintained school will have certain funds for a certain funding period. The formula cannot be changed after the funding period has commenced ( regulation 10(5) ).
The age weighted pupil unit is a tool for financing of maintained schools:
48 Regulation 13 links a mainstream maintained school’s budget share to pupil numbers. The “number of pupils in the school” must be ascertained and taken into account in the funding formula ( reg. 13(1) ).Regulation 13(3) states “the date for ascertaining pupil numbers is 3rd October 2013” and the picture is completed by the definition of “pupils” in regulation 1(5)(g) . For reg. 13 purposes, this is “only those pupils who are recorded on the school census as either (i) registered solely at that school, or (ii) registered at more than one school, but attending that school for the majority of their time”.
49 Once pupil numbers are identified, a specific minimum amount must be included in the school’s budget share for each pupil for the coming funding period: £2,000 for reception through to KS2 pupils and £3,000 for KS3 and KS4 pupils. This is the current incarnation of what has historically been referred to as the AWPU (Age-Weighted Pupil Unit), according to DfE guidance. I note a minimum amount must be included in the budget share. A local authority is free to include more than this per pupil in a school’s budget share.
50 The time-line of the regulations means a school’s AWPU-funding for a funding period may not match its pupil numbers at the beginning of, or during, the period. AWPU funding for the period beginning on 1st April 2014 is fixed according to pupil numbers some six months earlier. Obviously pupil numbers may rise or fall during these seven months and also during the funding period itself.
SEN provision is of course, funded in mainstream schools, irrespective of whether a child has an EHC Plan. It should be remembered that most children with SEN do not have plans.
51 Regulation 11(3) is also relevant because it deals with funding SEN services in maintained mainstream schools. It states:
“(3) When making a determination under paragraph (1) [of a maintained school’s budget share in accordance with Part 3 of the Regulations] the local authority must identify within each budget share an amount calculated by reference to the requirements, factors and criteria specified in Part 3 [of the Regulations] which are relevant to pupils with special educational needs, such amount must be calculated using a sum of £6,000 as the threshold below which school [ sic ] will be expected to meet the additional costs of pupils with special educational needs from its budget share.”
I go on to consider some further aspects of the judgment in the next post.