Dedicated Schools Grant consultation: Mainstream schools document 2025

Executive summary

For a number of years, Norfolk has transferred a portion of the Dedicated Schools Grant (DSG) Schools Block funding to the High Needs Block each year, as permitted by national regulations. This principle is part of Norfolk's current Safety Valve agreement, which presumes a 1.5% annual transfer until the High Needs Block (HNB) deficit is resolved.

This practice is intended to support high needs provision for the high number of pupils educated outside of mainstream education in Norfolk as well as seeking to mitigate the high level of High Needs Block (HNB) deficit.

However, after extensive engagement with school leaders and Schools Forum over several years, the Local Authority (LA) is of the view that continuing the block transfer is counterproductive. In effect, the approach has resulted in funds being removed from mainstream schools and then redistributed back to them via Element 3 (top-up) funding, creating inefficiencies and challenges for mainstream inclusion strategies.

For 2026-27, the LA proposes to end the block transfer, allocating all Schools Block funding directly to mainstream schools via a local formula that closely mirrors the national one. The funding previously provided as Element 3 will instead be built into schools' core budgets, and the HNB's Element 3 budget will be adjusted accordingly. This change aims to provide schools with greater certainty and stability of funding, increase accountability for supporting pupils with high needs SEND, and encourage mainstream inclusion.

The LA recognises that there will be a need to review the Notional SEN budget in line with this change, and this is covered later in the consultation.

The proposed changes will result in increased budgets for the majority of schools due to the mechanics of the funding formula (all else remaining equal), but some schools will not see a change as they would continue to benefit from funding protections that are a feature of the formula.

In summary, the LA's current position is that consulting on a block transfer for 2026-27 would contradict previous collaborative efforts and the drive for mainstream inclusion.  The LA will engage with Schools Forum if, at a later point in time, the LA is required by the Department for Education to pursue a block transfer.

8.1. Background of Block Transfers in Norfolk

The DSG Schools Block is ring-fenced in line with the Dedicated Schools Grant (DSG) conditions of grant, but local authorities can transfer up to and including 0.5% of their Schools Block funding into another block, for example the High Needs Block, with the approval of their Schools Forum.  Without Schools Forum agreement, or where they wish to transfer more than 0.5% of their Schools Block funding into one or more other blocks, local authorities must submit a disapplication request to the Secretary of State.

Norfolk's currently approved Safety Valve agreement with the DfE (underpinning Norfolk's Local First Inclusion transformation programme) assumes a year-on-year transfer of c. 1.5% between the Schools Block and the High Needs Block until in-year balance is achieved and is sustainable, and the resolution of the cumulative HNB deficit.  This was accompanied by a significant increase in Element 3 funding back to mainstream schools.

Over multiple years, the Local Authority (LA) has undertaken significant engagement with multiple school leaders, previous DSG consultations and consultation with Schools Forum in relation to the benefits and challenges of a Schools Block to High Needs Block transfer.  This engagement and listening has led the LA to the view that:

• The block transfer is counter-productive when considering the whole system
• That it is not delivering in line with its original purpose, which was to support the funding of high needs provision for an increased number of students outside of mainstream provision and, therefore, increased pressure on the high needs block. 
• Instead, it is removing funding from mainstream schools at a time when Norfolk's strategy, along with the national narrative, is to increase mainstream inclusion. 

In Norfolk, this has led to a cycle of funding being removed from the Schools Block and a significant increase in Element 3 (top-up) funding from the High Needs Block into mainstream schools; in effect, removing monies from mainstream schools to then, effectively, redistribute via Element 3 (top-up) funding.

8.2. Proposed block transfer approach for 2026-27

Therefore, the LA proposes to remove the block transfer from the Safety Valve agreement for 2026-27 onwards.  In effect, this would mean:

• All Schools Block funding is allocated to mainstream schools via the local formula (mirroring the national formula as closely as possible)
• Funding in 2025-26 allocated via Element 3 would, in effect, be 'reallocated' via the Schools Block funding formula into mainstream schools' core budgets, equivalent to the existing block transfer (£9.7m in 2025-26)
• The Element 3 budget of the High Needs Block would be adjusted to reflect that the funding is already held within mainstream schools

This would enable the maximum funding into mainstream schools allocated via the National Funding Formula, supporting schools to have certainty of resource and to plan effectively, whilst also enabling increased accountability of all mainstream schools to support children with high needs SEND. 

The direction was set during 2024-25 when the new Element 3 model was confirmed, with funds equivalent to the block transfer from September 2025 allocated to schools as formulaic Element 3.  Distribution was based upon the local funding formula and how funds would have been allocated for that period of time if the block transfer had not existed.  This approach recognised that these funds were for SEND provision and were taken into consideration, along with a school's notional SEN allocation, when considering the funding of SEND provision within a school's Graduated Provision Map and, therefore, what additional cohort Element 3 funding they may require. 

Without the block transfer in place, it will be necessary to consider amending the size of the Notional SEN budget in Norfolk to support the same level of resource in Norfolk to continue to be utilised for SEND provision.  This is considered later in the consultation.

8.3. Impact upon schools' budget allocations

Due to the mechanics of the mainstream schools funding formula (mirroring the National Funding Formula), not all schools will see increases in their budgets as a result of this change (if all else remained equal, i.e. there is no change to pupil numbers, characteristics, factors and values).

This is because the funding formula restricts growth in funding for some schools to support protections that ensure that all schools have a Minimum Per Pupil Level (MPPL) of funding and that schools are protected that would otherwise see reductions on a per-pupil basis.  Please later sections on the Minimum Funding Guarantee for more information.

This situation would occur regardless of whether there is a block transfer in place, but the impact is accentuated when one exists.  This means that some schools are disproportionately impacted by a block transfer, i.e. they do not receive significant gains in funding that they would have received due to reduced values for all factors combined with funding required from the overall Schools Block allocation to cover the costs of protections (MPPL and MFG).

As detailed above, in preparation to move away from a block transfer, the decision was taken for formulaic Element 3 to be distributed from for the autumn and spring terms utilising the 2025-26 local funding formula. 

• The amount distributed is based upon the proportion of the £9.7m (1.43%) 2025-26 block transfer relating to those two terms (c. £5.7m). 
• The distribution of these funds reflected the impact of both schools being allocated additional gains, alongside reductions in the protection mechanisms in the formula required. 
• This reflected what would have happened in 2025-26 if there had been a lower block transfer. 

In effect:

• Some schools saw significant allocations of formulaic Element 3 (i.e. those that had growth restricted due to protections and the block transfer);
• Others saw a moderate allocation (i.e. where they may have had some protections that would then no longer be required);
• Others saw no allocation (i.e. where the level of protection required was reduced but not eliminated).

Removing the block transfer for a whole year would mean that the majority of schools would see an increase in their core budget from the Schools Block (if all else remains equal).  But, similar to the 2025-26 formulaic Element 3 allocations, there will still be some schools who will only see a small increase or nothing at all.  In a small number of cases, schools would actually see a very small reduction due to the interplays of protections unwinding.

The initial six columns (D to I) of the Notional SEN technical paper (v2) (Excel doc, 109 KB) provide an illustration of the impact of removing the block transfer both in terms of cash changes and impact upon MFG and MPPL protections.  This uses 2025-26 allocations, funding, factors and values and presumes no other changes. 

8.4. Link with funding for SEND provision

Under the new Element 3 model, schools are capturing their SEND provision on Graduated Provision Maps with consideration given to Notional SEN allocations and any formulaic Element 3 for the school when allocating Element 3 funding at a cohort level.   This means that any school who did not receive much, or any, formulaic Element 3 has not been disadvantaged in 2025-26 - where effective and efficient provision is required to meet identified needs, then it is funding has been identified via one of these sources.

There will be no need for formulaic Element 3 funding in 2026-27 if there is no block transfer in place, because this proportion of funds would already be held within the mainstream sector.

Presuming that Notional SEN allocations are updated to reflect this shift of resource from the High Needs Block to the Schools Block year-on-year (see later in the consultation), an expectation would remain that schools across Norfolk would still be expected to utilise similar resources for SEND provision, but:

• Schools would have greater stability of the funding
• Funding would be more closely aligned to the NFF factors and values
• And, alongside the new approach to Element 3, schools can plan effectively and efficiently for high levels of inclusion with the mainstream system to support children with high SEND

8.5. Summary

In summary, at this time, the LA are of the view that it would be contrary to the previous collaborative work with schools, and the intention to support increased inclusion in mainstream schools, to consult on a block transfer for 2026-27 as this would be in direct contradiction to our previously stated view. 

These materials are intended to transparently lay out the impact of moving away from a block transfer and it should be recognised that the impact will be different for different schools.  

It should be noted that the principles describe presume no significant change to the funding landscape for schools and based upon the best available information to the LA at the time of launching the consultation.  Clearly, the principles discussed may need to be reconsidered once long-awaited reforms are announced.  If this is the case, the LA commits to continuing an open and honest dialogue to seek the right solutions for Norfolk schools and pupils.

The LA has made this case to the DfE and, whilst the LA continue to have a dialogue with the DfE regarding Norfolk's Safety Valve agreement, the LA has not yet had confirmation from the DfE of agreement to this amended approach.

If the DfE subsequently require the LA to apply for a block transfer, the LA will engage with Schools Forum to seek their view, utilising previous consultation and engagement feedback received from school leaders.