Can a local authority charge a school or academy where it excludes a pupil?

In our work with schools and academies, we continue to see local authorities seeking to charge schools and academies for making a permanent exclusion. These charges are often presented as part and parcel of the allocation of funding which must follow the pupil to another school or academy or to alternative provision. However, they are also presented as an additional charge or even as a fine. The rationale often given by local authorities for these additional charges is that the money is needed to fund local authority-run alternative provision. Given the climate of financial constraint, this approach is understandable. However, it is not one which local authorities are permitted to take under the legal framework which governs school funding and exclusions. 

The Legal Framework for Maintained Schools 

The legal framework for maintained schools is set by section 47 of the School Standards and Framework Act 1998 (the "SSFA") and regulation 37 of the School and Early Years Finance (England) Regulations 2023 (the "Funding Regulations"), where regulation 37 requires a local authority to make an adjustment to the delegated budget for a maintained mainstream school where a pupil is permanently excluded from that school and moves to another maintained mainstream school. 

The Funding Regulations provide the relevant statutory formula which determines the amount by which the delegated budget must be adjusted. 

However, the Funding Regulations do not permit a local authority to levy any additional charge on a maintained mainstream school where a pupil is excluded from that school. The principle is that that the pupil's relevant funding, or more precisely the balance of their funding for the remaining school year, follows the pupil to the new maintained mainstream school. 

The Legal Framework for Academies 

The legal framework for academies is set by their funding agreement which provides that mainstream academies and special academies which admit pupils without statements of special educational needs must, if asked by a local authority, enter into an agreement (the "Exclusion Agreement") which has the effect that, where 

the arrangements for payment will be the same as if the academy were a maintained school under the Funding Regulations. In other words, the budget for that academy will be adjusted so the balance of funding follows the permanently excluded pupil to another school or academy or to alternative provision. 

The amount by which the budget must be adjusted should accordingly follow the statutory formula for maintainedmainstream schools in the Funding Regulations. 

Neither the funding agreement nor the Funding Regulations permit a local authority to levy any additional charge on an academy whichmakes a permanent exclusion. In fact, the funding agreement makes clear that the general annual grant is paid to the academy trust 'towards the normal running costs or capital expenditure' of an academy. An academy trust is therefore not permitted to pay its general annual grant towards the operating costs of a local authority-run alternative provision and/or for any other provision for a pupil who is not on their roll. 

A breach of the funding agreement may lead to a Notice to Improve being issued by the Education and Skills Funding Agency ("ESFA") which, if not complied with, would entitle the ESFA to terminate the funding agreement. 

A further point on the Exclusion Agreement 

As noted above, an academy trust is required (by its funding agreement) to enter into an Exclusion Agreement if invited to do so by a local authority.  However, we have seen local authorities insist on a particular form of agreement, which either seeks to replace the Funding Regulations formula or includes an obligation to make additional payments over and above those required by the same regulations. 

A local authority cannot insist that an academy agrees to these provisions.  An academy is not required to agree whatever the local authority presents (even if the agreement is in the same form that has been signed by other academies). Only an agreement which complies with the Funding Regulations should be entered into.  However, should an academy sign up then, regardless of the position under their funding agreement and the Funding Regulations, the academy becomes contractually obliged to pay the additional charges (i.e. the academy has agreed to the levy). 

In some agreements, we have seen the local authority give itself the power to determine what the level of payment from the academy will be in the future, bypassing the Funding Regulations completely. Again, this is not a position which should be accepted by an academy but which will bind the academy where it has entered into the agreement. 

There is a separate point as to whether the individual who signed the Exclusion Agreement on behalf of the academy may have acted in breach of authority, breached the academy's scheme of delegation or be subject to some other charge of misconduct. 

What about the schools forum? 

When challenged on the levying of charges to schools and academies for permanent exclusions, local authorities may suggest the charges are required to fund local authority-run alternative provision, have been approved by the schools forum and are being implemented on this basis. 

However, section 47A of the SSFA states that the purpose of a schools forum is to advise the local authority. Regulation 10(1)(b) of the Schools Forums (England) Regulations 2012 (the "Schools Forums Regulations") also provides that a local authority must consult the schools forum annually in respect of the local authority's functions relating to the schools budget including arrangements for paying top-up funding to pupil referral units and other providers of alternative provision. 

Neither the SSFA nor the Schools Forums Regulations provide that decisions of a schools forum are binding on a local authority. The fact that a schools forum confirms it is content with charges proposed by a local authority during consultation does not therefore mean that the charges are approved and are to be applied or that they are a legitimate activity by the local authority. Certainly, an agreement with the Schools Forum about what charges can be made following a permanent exclusion can't override the Funding Regulations. 

What happens on a review of a permanent exclusion? 

Whilst local authorities are not permitted to change the statutory funding required by the Funding Regulations, the School Discipline (Pupil Exclusions and Reviews) (England) Regulations 2012 do permit a review panel to order 

the sum of £4,000 if, following a decision by the review panel to quash the original decision to permanently exclude, the academy trust or the governing body (in the case of a maintained school) reconsiders the exclusion and decides not to reinstate the pupil or fails to reconsider the exclusion within 10 days of receiving notice of the review panel’s decision. These are the only circumstances where a charge may be levied in relation to a permanent exclusion. 

In summary 

The continuing trend which sees local authorities seekingto levy charges on schools and academies for making a permanent exclusion, whether to fund local authority-run alternative provision or otherwise, is not permitted by the Funding Regulations or by an academy trust's funding agreement, even where the Schools Forum is content with the charges proposed by the local authority.   

While schools and academies may understandably feel morally obliged to pay the charge to ensure there is suitable alternative provision for excluded pupils, there are therefore clear grounds why these charges need not be paid, particularly in the current climate of financial constraint which affects schools and academies, as well as local authorities.