Shaping the Future: Strengthening Scotland's education system through empowered schools

6. Funding

Following the money

Overall total direct funding from Scottish Government to local authorities across Scotland in 2025/26 is projected to be approximately £15.2 billion. (This block grant is itself divided between General Revenue Grant, Specific Revenue Grant and Non-Domestic Rates.)

Within this financial settlement, Education Services consistently represents the highest Net Revenue Expenditure for local authorities, with planned spending of just under £8bn in 2024-25, and a budget estimate for 2025-26 of a little more than £8bn. Education Services accounts for nearly half of general fund net revenue expenditure in all years since 2021-22^[53].

Net Revenue Expenditure on Education Services, as reported by local authorities 2024/25

• Between £48.9m and £821.1m across the 32 local authorities
• Between 46% and 60% of the general fund net revenue expenditure, with the mean being 50%
• Spend per primary sector pupil between £6,686 and £13,100, with the mean being £7,412
• Spend per secondary sector pupil between £8,070 and £14,806, with the mean being £9,033

Notably, between 2013/14 and 2024/2 only social work and education have seen an increase in real terms net revenue expenditure. Official Scottish Government statistics indicate that education has benefited from a reported 24% increase over that time.

“Funding approaches need to uphold policy intentions: Bold ambitions for the future of education need dedicated additional funding and to be carefully planned with reference to all the relevant component parts, including teacher education and expertise. Evaluation of impact must also be built in from the beginning.” – GTC Scotland response, Call for views, February 2026

As well as emphasising the need to co-ordinate policy and implementation across all parts of our system, our General Teaching Council is explicitly stating that investment must match our educational ambitions. Further, in order to assure stakeholders of the benefits of that investment there needs to be a mechanism for assessing value for the public purse. It follows that both process and outcome performance indicators have to be in place to enable that assessment to be carried out.

“Sustained high-quality education constitutes a long-term investment in the knowledge, skills and competencies of people, leading to higher productivity, earnings and quality of life for individuals. At the macro level, a well-educated workforce is a key contributor to greater aggregate productivity, innovation and long-term economic growth.

High-quality education pays off for individuals, communities and societies beyond economic outcomes. Better-educated individuals live longer and healthier lives. Education can also help societies to adapt creatively to change and to make the most of new opportunities, such as the digital transformation.” – OECD, Value for money in schools education, November 2022 ^[54]

The OECD, representing the 38 member countries, highlights that investment in education brings a range of direct and indirect benefits to individuals and to the societies in which they live and work.

95% of social media is nonsense. Even Abraham Lincoln says so.

Our children and young people face a barrage of misinformation and disinformation, primarily through social media. Autocratic systems supported by populist politics have gained traction in several parts of the globe. In one case a political leader has declared that he ‘loves the poorly educated.’ If investing in education leads to more engaged and better informed citizens it is worth every penny, and more. Schools and teachers within them are a valuable source of balanced views, and they encourage the development of critical thinking skills, vital to counteract click-bait headlines and fallacious claims. Investment in our schools and teachers stems the flow of damaging social influence.

If it is so economically and socially advantageous to invest in school education, why don’t those who hold the purse strings loosen them? The answer is not straightforward. Those who make decisions on education spend are also subject to intense political and moral pressures relating to other societal needs in their hinterland. National and local governments cannot ignore the immediate demands that stem from health, social care, and housing, amongst others. Funds are disbursed to respond to the present and the past, as well as the future.

Further, our democratic system means it is not easy to guarantee long-term cross-party consensus beyond one parliamentary term- despite the universal acknowledgement that significant changes to education provision can take longer than 5 years to come to fruition. These hurdles though substantial are not insurmountable, provided that aims are clearly defined and agreed through a participative process, supported by an implementation strategy that is ambitious but realistic.

Education budgets and school funding

School leaders report that their schools are being allocated progressively less monies per annum. From their perspective the logical conclusion is that the funding allocated to their local authorities must also be diminishing. Of course, school leaders are aware that several factors affect the level of funding that reaches their school but are equally aware of the high expectations placed on their and their colleagues’ shoulders.

Recently, school leaders were informed of very welcome additional funds being allocated by national government to enhance teacher numbers. Not all of this funding was spent on enhancing teacher numbers. Similarly, grant funding commitments were made shortly before the pandemic to provide an in-school counselling service in every school. Not all of this funding reached schools to provide counselling. In hindsight, this would have brought crucial support to the children and young people affected by what ensued shortly after. Unfortunately, additional funding announced by national government often does not materialise at school level.

When our parental and wider communities become aware of additional specific grant funding to their schools, they expect to see the fruits of this in their local school. If it does not materialise, parents – as they have every right to do – ask questions. This applies equally to the increased block grants that are being allocated to local authorities. Parents ask why it is that in real terms less money is reaching their child’s school when national announcements indicate the opposite. Meanwhile the gap between need and resourcing continues to grow in the backdrop of curriculum change and an increase in the population of learners with recognised additional needs.

The effects of the block grant methodology agreed in the 2007 Concordat between Scottish Government and COSLA is a topic of discussion amongst school leaders and their representatives. The widespread perception amongst the latter is that not all of the funding allocated to local authorities that they assign to education services reaches schools. This is inevitable to a degree, as education departments have their own costs to cover, particularly for staffing at officer, manager and senior manager levels. Education (and variation) departments also have to “pay” their local councils to provide corporate support services such as HR and payroll, finance and legal advice. While this is reasonable, many leaders within the education system – in schools and outwith - do question the appropriateness of paying for these functions 32 times over.

The experiences of school leaders regarding quantum of funding in recent years contrasts with data supplied by COSLA, previously referenced, which indicates that local authorities spend on education exceeds the allocations they receive from Scottish Government. It is logically possible for both perspectives to be right, or indeed wrong. The key point is that the current funding arrangements for education provision are not conducive to transparency, trust and financial confidence amongst key stakeholders.

Defining education funding

There are significant financial pressures on local councils as they face a projected cumulative budget gap of £647 million over the next two years. At individual council level, budget gaps ranged from £70.3 million in the City of Edinburgh Council to £4.4 million in Eilean Siar, representing five per cent and three per cent of their respective total revenue budgets. Councils anticipate that funding pressures will continue^[55].

Tensions exist beyond the need for savings. The debate between COSLA and the Scottish Government over ring-fencing centres on the balance between national policy priorities and local autonomy, with 2026 budget discussions indicating that roughly 7% of revenue allocation to local authorities is either ring-fenced or tied to specific national policies. COSLA argues that high levels of ring-fencing and national initiatives restrict local authorities’ flexibility to make local decisions, making it difficult to manage rising costs and demands on services. It argues that the cumulative effect of ring-fencing and real-terms cuts is leading to the "enfeebling" of local democracy.

The Scottish Government will highlight that it is now providing record funding for local authorities and that it has provided consecutive real terms increases, as confirmed by external commentators such as SPICe and the Accounts Commission. This, it argues, has allowed local authorities to protect critical services including education. Scottish Government would also note that in 2025-26 only 2.7% or £0.4 billion was formally ring-fenced for specific joint priorities such as the Pupil Equity fund, Gaelic and Criminal Justice Social Work. Scottish Government emphasises that it is delivering a fair settlement despite challenging financial conditions from the UK government.

Clarity and specificity around funding quanta, purposes and levels of flexibility would shed welcome light on this dialogue, so pivotal in influencing the quality of life and quality of public services including education in Scotland.

Scottish Government’s policy towards local authorities’ spending is to allow local authorities the financial freedom to operate independently. It is then the responsibility of individual local authorities to manage their own budgets and to allocate the total financial resources available to them, including on education, on the basis of local needs and priorities, having first fulfilled their statutory obligations and the jointly agreed set of national and local priorities. Current arrangements mean that it is for locally elected representatives to make local decisions on how best to deliver services to their local communities.

The statutory functions assigned to local authorities reportedly take up a significant proportion of their financial commitments. At the time of submitting this report unfortunately it has not been possible to obtain a comprehensive list of those statutory functions from local authority representatives.

Scottish Government allocates funding across the 32 local authorities based on historical agreements and formulae, the latter itself incorporating up to 29 different components of education provision. In summary the Scottish Government seeks to distribute funding fairly between councils. It does this by agreeing the method of distribution with the Convention of Scottish Local Authorities (COSLA)^[56] and councils^[57].

Although Scottish Government does not specify funding quanta for education within the general grant allocations to local authorities, there are a few Scottish Government led initiatives for education that are ring fenced for specific purposes and outcomes. These include the Scottish Attainment Challenge Pupil Equity Fund and Gaelic Medium Education. It is important to highlight that in almost all cases the final decision on quantum of education spend, and on what is included in the definition of education spend, lies with local authority leaders.

There are benefits to this, not least of which is the flexibility that it affords to elected members and senior officials to respond to the varied and changing needs of their citizens. There are also potential disadvantages.

Commitments around the quality of and outcomes from school provision are made at national level, as are overall spending pledges. Those that appear as manifesto commitments are closely scrutinised over time. Scotland’s current funding framework and the fact that most financial decisions pertaining to education are made not at national but local government level brings substantial variation in how much and how well schools across Scotland are funded. This is an uneasy situation for schools.

In delivering the wide range of local services leaders consider how each service can contribute to the outcomes in other services. Strong arguments are made that for example the provision of parks and public libraries contribute to children and young people’s general wellbeing and their attitude towards learning. Similarly, it is certainly right to claim that addressing social issues around poverty and health have a direct effect on children’s readiness to learn in school. What is not helpful is the lack of clarity over what is and what is not included as spend on education services across our local authorities.

Given the relationship and the need for partnership working between national and local government, arrangements around funding are complex. Financial accounting over those complexities inevitably requires expert oversight. What might be reasonably questioned is the degree of challenge to follow the flow of public money from national government to local authorities then into schools. It is remarkably difficult to ascertain how much is spent on school education per se at local level. Indeed, it is not clear what each local authority even defines as education spend.

When the Accounts Commission and Audit Scotland sought to understand the link between education spend and education outcomes they found similar challenges. From both a professional perspective and a layperson citizen’s perspective it is not at all easy to find out how much and how well money is being spent on education. The Accounts Commission (in conjunction with Audit Scotland) has consistently found it difficult to identify and track spending on education due to a lack of transparency, complex funding allocation methods, and inconsistent recording across local authorities. From engagements with elected members it is clear that they are aware that for public audiences the transparency of local government finances is ‘mixed’.^[58]

Transparency of education spend, and consistency of accounting and reporting across the system, are necessary to enable accurate evaluation of the decisions, processes and resultant value added to outcomes.

By comparison, specific grant funding allocations from Scottish Government are relatively transparent and openly evaluated (notwithstanding questions around the validity and reliability of outcome metrics currently in use). For example, The Scottish Attainment Fund, itself subdivided into Strategic Equity funding, Pupil Equity funding and the Care Experienced Children and Young People fund, is allocated annually with detailed quantum and detailed associated purposes made readily available.

Further, at individual school level transparency over budgets enables accurate evaluation of inputs and outcomes, open to scrutiny every time attainment and achievement is measured and reported to the community. As well as recording attainment outcomes, schools provide evidence for the quality of internal processes when undertaking Standards and Quality reporting, in compliance with the Standards in Scotland’s School Act 2000.^[59]

Audit Scotland and the Accounts Commission publish annual reports, holding councils accountable for improvement and identifying best practices for the local government sector. However, there is no specific reference or deep dive into how the largest element of council spend, namely education, is delivering value for money. There is potential for Audit Scotland to be joined by HM Inspectors in reviewing the management of resources to achieve improved outcomes for learners. There is precedent for this. For example, the inspection of Challenge Authorities in closing the poverty related attainment gap involved HM Inspectors of Education working with colleagues from Audit Scotland to focus on how well additional finance from the Scottish Attainment Challenge and Pupil Equity Funding was being managed and the impact it was having on relevant groups of children and young people. Yet this is not done routinely for the vast majority of local spending on education.

At local authority level the link between education expenditure, quality of processes and the resultant outcomes is not clear. This opacity is not deliberate, rather a by-product of the complexities previously touched on, and also because transparency is burdensome. Indeed, it may be viewed as a drain on resources that are already at a premium. However, if transparency is improved, it will not only identify what works best, it will in turn strengthen the democratic process that Scotland holds so dear.

Three of the ‘principles of democracy’ highlighted by The Civil Liberties Union for Europe^[60] emphasise the importance of:

• Participation of Citizens: Citizens have a voice in shaping their government and future through various forms of participation.
• Accountability: Government officials are accountable to the public.
• Transparency: Government actions are transparent and open to public scrutiny.

It would be in keeping with these principles for education funding to be more clearly defined and more transparently tracked and openly evaluated.

Ring fencing, improved financial transparency, or both?

The pros and cons of ring-fencing school funding was raised during several engagements with stakeholders. In favour is the argument that ring fencing education spend would enable much more transparent tracking of that spend, while fully appreciating that other societal factors overseen by councils influence what happens in formal learning environments. It is also argued that provision would inevitably improve if the all money that the public thinks is being spent on children’s education actually gets spent on children’s education.

One reason for the opacity is that there are many different ways that councils report education spend – perhaps 32 different ways. Councils are often blamed for underspending on education, while residents continue to complain about potholes and bin collections. In reality authorities may in fact be allocating every penny from both the general grant and specific funding to schools. We simply do not know.

In its response to the Call for Views COSLA stated that it “is clear that ring‑fencing can undermine local democratic decision‑making, leaving local authorities with very limited flexibility and leading to significant cuts in other non‑ring‑fenced services.” This illustrates the difficult decisions having to be taken by local authorities when grant revenue is ring-fenced. Within the same paper COSLA states “As financial pressures intensify, the funding available to schools, including through DSM, provides Headteachers with diminishing flexibility to address key challenges such as closing the poverty‑related attainment gap.” This perfectly illustrates the competing priorities facing local authorities, and the resultant pressures on funding to schools. Although local authorities understand the importance of devolving monies to schools at levels which enable high-quality provision for learners, they are obligated to divert proportions of that funding to ensure that other local services are resourced.

The debate around the effects of ring-fencing education funding on local democracy is salient. Some aspects are covered within the Following the money section above. Wider dialogue around the relationship between national and local democracy, and indeed how best to define and strengthen local democracy would be of benefit as a reformed education system is co-constructed by key stakeholders.

Recommendation F1

At national level Scotland should define what constitutes education spending, including statutory duties, and ring-fence this when disbursing to those charged with delivery.

Local authorities should clearly define what is included in education funding and improve the ease with which citizens can track the provision and the outcomes that result from that provision. When calculating revised general revenue grant funding allocations for the provision of education services:

• Existing formulae should be used in the first instance, adopting pupil roll and geographical context from current methodology as core variables.
• National government and local authority providers should co-create future iterations of the funding formula to best reflect and adapt to changing conditions.

Recommendation F2

There should be clear tracking and transparency of monies allocated to school education from national government grants, through local authorities and within schools, closely adhering to the principles and expectations of the Scottish Public Finance Manual^[1].

• Current and ongoing recommendations of the Audit Commission should be prioritised, with particular reference to mechanisms that support public access to, and understanding of, local government financial plans and statements.
• Embed increased accountability for key participants to enhance both financial probity and financial best value from the public purse.

These arrangements would strengthen financial probity and democracy through informed citizen-led decision-making. What they offer in common with the introduction of process indicators in Recommendation F3 is affording our education system the means by which to understand with greater precision and confidence what improves the lives and life chances of our children and young people through their educational experience. This in turn would enable those more effective strategies to be identified and delivered more widely across our schools and communities. This would help to turn the core aspirations of our education system into reality.

Additional Specific Grant Funding: A recent exemplar

In December 2024 it was announced that there was a joint commitment from Scottish Government to:

• restore teacher numbers to 2023 levels
• freeze learning hours to support the learning experience for pupils
• make meaningful progress towards reducing class contact time for teachers

In order to support each of these measures, the Scottish Government announced an increase in the funding available to local government to £186.5m and would issue £145.5m to local government in full during the financial year. According to Scottish Government, Local Government would also receive additional funding of £28 million from 2025-2026 to develop the Additional Support for Learning (ASL) education workforce. Finally, further funding of £1 million was announced to support national initiatives which would help to recruit and train more ASL teachers.

It is not possible to ascertain whether the ASL workforce capacity increased in line with the £28million increase in funding and the £1million allocation for recruitment. This is due to the challenges in obtaining workforce data from across our 32 local authorities.

Following the money allocated to reduce teacher class contact time has been equally challenging. There have been media releases from national and local government that seem to contradict each other’s claims. Improved transparency and shared understanding of the flow of monies through the levels of the system would help to explain why this happens, and presumably to reduce the risk of repetition.

The 2024 financial boost for teacher numbers did not have the desired effect. The reasons for this are not clear. It is safe to say that school leaders and the parental community alike are disappointed with the apparent disconnect between rhetoric and reality.

Significantly, on 13 March 2026, following the prospect of strike action by EIS members, an agreement was reached between Scottish Government, COSLA and EIS to introduce a weekly reduction in class contact time, with a further £40m of funding to recruit additional teachers.

Why the disconnect arises

Additional grant funding for education is not always ring fenced for the purpose(s) designated by national government. In the backdrop of local authorities struggling with overall budget gaps, it has been stated that ring fencing additional specific education grants would have a catastrophic effect on other council services. The hard choices having to be made by senior council leaders reflect their commitment to providing services that holistically enhance the quality of local residents’ lives.

The scope and timescale of this report do not permit full exploration of these funding tensions. However, what is certain is that the final deployment of funding implicitly designated for schools is opaque, as shown in Appendix C, Local Authority Funding. This creates a degree of friction and, regrettably at times mistrust, with schools questioning local councils and local councils questioning national government. This is unwelcome and unhelpful. At a basic level it creates uncertainty over just how much each school leader can expect to spend on optimising their learners’ lives and life chances.

A prominent senior figure posed these questions to me: How much does it cost to run our education authorities? How much do we spend providing school education to our children? Several months on, with the advantage of time for research and engagements with those who may have the answers to such questions, I still do not know the answers. In truth, it is unlikely that anyone knows.

Ultimately, if Scotland does not know how much it spends on education provision and on what that encompasses it cannot know whether it is spending the money effectively.

When responding to these questions around costs, senior local authority education figures have asserted that these are the wrong questions to ask, and that we should instead be focussed on outcomes.

“Further, issues relating to use of resources to support school improvement have been subject to many reports… all of which is unhelpful and detracts from… securing improved outcomes for our children and young people.” - ADES response, Call for Views, February 2026

Of course, there are risks associated with creating a system where local authority spending is tracked at a granular or micro-level. One risk is that leaders may adopt a silo mentality and lose the ability to see (or for that matter care) beyond their own budget lines. The financial ‘swim lanes’ approach taken by some commercial organisations may not necessarily suit public services, because so many factors contribute to the quality of citizens’ lives. This is a reasonable case. However, there is an even greater risk in not having a clear picture of the flow and quanta of monies for individual services, particularly at a time of public finance constraints.

It is not beyond the capability of system leaders to consider and act upon interdependencies of budget lines. Awareness of the detailed revenues and expenditures for each service would support rather than hinder decision-making. Knowing how much it costs, for example, to run their primary schools and how much it costs to manage their parks and libraries should enable a strategic overview and informed decision-making about both services. Silo thinking would only occur if system leaders fail to fully take interdependencies into account. Based on the high levels of capability of the system leaders with whom I have engaged the risk of this happening is small.

There are far greater risks stemming from the substantial degree of inconsistency in the way that local authorities report education spend. The guidance around local government financial reporting is robust, through the Local Financial Returns^[61], but inevitably professional assumptions are made that lead to variations in interpretation and application. From a national perspective the way spending is currently reported makes it impossible to be certain about how much money is spent on education and therefore to evaluate how well that money is spent. There is also a risk that in some cases we are simply not spending as much on our children’s education as they deserve. On this Anne Keenan, Assistant General Secretary for Educational Institute of Scotland (EIS), has stated “The situation is more acute in areas of deprivation with schools often having to resort to fund-raising activities, which involves schools seeking financial support. It is unacceptable to expect teachers and families to pay for the essentials required by a public education system.” – IPA roundtable meeting with Teachers and Leaders Unions, February 2026

Scotland needs to define what it is spending on education and what it expects to be done with that funding to support the best outcomes possible.

Unless we define what educational success is and identify the right metrics to gauge the level of that success we could be working very hard to achieve something quite different to our stated ambitions. We could, by extension, be heavily investing in processes and systems that do not contribute to our end goal. All systems are subject to this risk, particularly those underpinned by continuous improvement such as education provision. This point links particularly closely to Recommendations I1 and I8 within the Improvement theme.

The importance of defining success is emphasised when we consider that Scottish education is awash with silver bullets. We remember how the dogma of learning styles dominated methodology in our classrooms. There was also brain gym, which saw many lessons begin with mental and physical contortions from learners and teachers. Remember also the fad which dictated that learners must never sit in pairs or in rows, because the only way to learn was in groups.

There are many reasons for this quick-fix phenomenon, generating a growing satellite industry offering many varieties of snake-oil. The main reason for this is teachers’ determination to do their very best by their learners. Thankfully, the profession has become more sophisticated in understanding that innovations must be learner-contextualised and adapted for the nature and content of the learning itself. The cautionary lesson here is that public monies have been spent on approaches that have brought little or no benefit to learners. The system needs to keep getting better at identifying exactly why some approaches have a positive impact on outcomes, both in and beyond the classroom - at all times based on well -established or strong emerging evidence. The same principle applies at authority level: we need clearer understanding of what makes the difference and how best to implement it in order to assign spending accordingly.

The CfTE is one potential source of well-evidenced guidance. The CfTE was established in 2025 to enable teachers to enhance their expertise in pedagogy. As a national resource the Centre aims to play a central role in helping teachers to develop and share high-quality practice.

Another source of advice is the Education Endowment Foundation (EEF)^[62] and what was fondly called the Tartan version, the Equity Toolkit.^[63] The current version of the latter contains much in terms of rationale for approaches and provides exemplars of effective practice and resultant outcomes. Perhaps the profession should be making more of this, particularly since Education Scotland’s ‘Effective Practice’ provision no longer gains as much attention as it could amongst practitioners.

There is also a role for HMIE to share more successfully those highly effective approaches adopted by schools that result in strong outcomes for learners. The absence of comprehensive ‘state of the nation’ reports which analyse nationwide inspection trends is a significant weakness within the system. The Inspectorate is well placed, given the first-hand observations of learning, teaching and assessment, to provide a valid and reliable evidence base and overview of what works.^[64]

Beyond the classroom: Societal and system-level variables

There is a further challenge in identifying the processes, methodologies and actions that have the most positive impact on educational outcomes. There is certainty about the influence of children’s socio-economic background. There is a high degree of confidence that effective classroom practice, as defined by evidence, leads to improved outcomes. However, there is much less certainty about which local authority processes have the biggest impact on counteracting disadvantage and improving attainment. This is partly due to the multitude of variables that affect children’s and young people’s education outcomes.

One example of the range of such variables is highlighted in a 2024 DfE study of contributory factors at primary school level^[65]. In this study 46 unique variables across eight different research organisers were considered and shown to be influential. Cognitive and non-cognitive capabilities; physical health and mental health and well-being; additional learning needs; adverse childhood experiences; looked-after status; parental education level; and the quality of school environment and pedagogical approaches were confirmed as influential factors, all of which are familiar to anyone involved in schooling. After all, teachers teach children and young people, not learning machines. However, while factors outside schools and classrooms can make a substantial difference, schools must optimise their own sphere of influence including adapting the curriculum and ensuring high-quality provision in and around the classroom.

The detailed process and outcome indicators within the HGIOS framework assess the effectiveness of in-school factors and provide valuable evidence to enable schools to learn from each other. Without the combination of input and outcomes indicators it would not be possible to separate external influences from what happens inside schools themselves.

Outwith schools one might expect similar frameworks to be in place. These would identify and evaluate the effectiveness of what happens at the other key levels of our education system. Given their statutory responsibilities, such a framework would be particularly appropriate at local authority level. Independent scrutiny of processes and how they affect outcomes would be valuable for individual local authorities and would provide intelligence across the system. It would however, be difficult to contend that such an approach exists in Scotland at the present time.

Leaders in schools and local authorities in more deprived or remote locations will point to challenges and constraints that reflect their unique context. Those who lead in more privileged areas of Scotland readily admit that they have a favourable starting point for success. They recognise that supportive home environments that provide study resources, space and silence for home learning make a significant difference to their children and young people. Not having to worry about the next meal and being able to stay warm also substantially affect outcomes. The availability of parks, libraries and private tutors are other variables from which some learners benefit. But how clearly can we understand the effects of education inputs and processes at local authority level when we do not identify those inputs and processes in detail? How is it even possible to evaluate the quality of local authority education provision if we cannot distinguish what they do from the many background contextual variables? How can our system confidently learn from and share examples of effective local authority practice that lead to successful outcomes?

In essence, how can the Scottish education system promote and invest in certain local authority approaches above others, confident that they are the cause of better outcomes?

We have a duty to accurately distinguish between correlational data and causation. It is only if we do so that Scotland’s educational system and its component parts can become more confident about which strategies have a significant positive influence on educational outcomes. It is only if we do so that we can be sure of investing in the best strategies for our learners.

As previously discussed, currently there is an abundance of outcome indicators in national and local government quality improvement frameworks. The publicly shared performance indicators that measure local authority quality are predominantly outcome-based. Technically they are backward looking, they do not capture what has made a difference and how that difference has been made. There is of course a place for these outcome indicators as they provide valuable information to elected members and constituents about how well children and young people are performing, but they do not go far enough. If this outcomes-only system were to be used in the sporting arena, only the final result of competitions would be considered and the many things that lead to improved performance and better outcomes would be ignored. It is impossible to get better if we are not clear about we what contributes to improvement.

How Good is our Education Authority? (‘HGIOEA’ developed by ADES) includes only a small number of process indicators. Whilst local authorities routinely share progress with elected members against stated objectives, it may be appropriate to address the balance between process and outcome indicators. The process indicators that are within HGIOEA are broad in nature and less specific than, for example, indicators utilised in the scrutiny of schools. They would not provide the same level of specificity and certainty as those within HGIOS4. It follows that if local authorities cannot be confident about which processes are adding value to schools, the extent to which their strategies contribute to the overall vision of the local authority would also be unclear.

It is not possible to separate cause from correlation when the quality of the processes themselves are not evaluated. Furthermore, the ability for the system to learn from evidence of effective practice is itself impeded. My instinct after three decades in schools is that some very effective and well-directed practice takes place in our local authorities. But, like other members of the public, I cannot be sure. After the numerous engagements and research activities undertaken for this report, I do not know if anyone can be sure.

Based on outcome data, assumptions are made that some local authorities, through their strategies, make a bigger positive difference than others. Our system should embed routine evaluation of the strategies and processes that are deployed, while recognising contextual differences. This would enable the system to gain an understanding of what does in fact make the biggest positive difference to learners’ outcomes.

Such scrutiny of processes, combined with analysis of outcomes, would bring the evaluation of education authority effectiveness more in line with the evaluation of schools themselves.

Recommendation F3

Integrate well-defined process Key Performance Indicators (KPIs) into the evaluation of local authority education provision, for self, peer and independent external application. The purpose of this would be to evaluate the impact of practice and through this the value for money spent from the public purse. For the impact of this recommendation to be optimised, external scrutiny based on the HGIOEA KPIs (I4) would need to be adopted.

Illustrative examples of enhancements to existing process KPIs in HGIOEA may include:

• Levels of teacher vacancies, stage and subject areas, and length of vacancy. Number of applicants per vacancy.
• Devolved School Management of Funding: Adherence to the national guidelines, evaluated through qualitative data from leaders as well as scrutiny of accounts.
• Teacher satisfaction and agency levels: Measures the working environment from the perspective of practitioners.
• Parental satisfaction rates across key areas of provision.

This change would build on the call for greater transparency of the flow of public monies.

Attainment Scotland Fund

One significant line of education funding is the Attainment Scotland Fund, which supports the Scottish Attainment Challenge (SAC). This is divided into 3 funding streams - Pupil Equity Fund (PEF), Strategic Equity Fund (SEF), and the Care Experienced Children and Young People (CECYP) Fund. One key reason that PEF is significant is because it is designed to enshrine subsidiarity and provide flexibility to school leaders, in partnership with their school community.

Unfortunately, what began as a welcome source of additional funding to be targeted at interventions or priorities identified by each school has in some parts of the country become a bureaucratic burden. Evaluations such as the Attainment Scotland Fund Headteacher surveys have highlighted that PEF entails substantial administrative work regarding recruitment, procurement, and financial monitoring. This is at odds with stated policy around the Scottish Attainment Challenge.

‘Pupil Equity Funding is allocated directly to schools and targeted at closing the poverty related attainment gap...’ and ‘This funding is to be spent at the discretion of the head-teacher working in partnership with each other and their local authority.’ ^[66]

By 2026, instead of additionality to enhance provision for less-privileged learners, many schools are now in reality required to spend this 'additional' money to cover basic staffing and education materials. The consequence of this unforeseen development means schools are having to devote disproportionate time and energy to justify spend on core educational provision. This is the antithesis of the intention of the Attainment Challenge programme.

Despite these contradictions school leaders have been and continue to be very positive about the principle of greater autonomy at the level of school communities. In some parts of the country school leaders report that the principles underpinning PEF are being upheld and they have as a result been entrusted with providing vulnerable children with the support they would not otherwise have had. It has been life-changing for some children and young people in Scotland. If this is to happen more often and PEF is to fulfil its intended purpose it is essential that the monies are truly additional to core funding and remain at the discretion of the Headteacher.

A high-level review of the potential future of the Scottish Attainment Challenge and the Attainment Challenge Fund beyond 2026/27 is underway.

In relation to the methodology to calculate PEF allocation, privilege and deprivation will move beyond the use of free school meals data. There is growing evidence that the application of data drawn from CILIF (Children in Low Income Families) and eligibility for clothing allowance would target resource more effectively. Furthermore, elements linked to SIMD range, particularly the proportion of Quintile 1 learners (but importantly not average nor mean SIMD), rurality, and health data have been proposed during engagements in the course of writing this report. It would make sense to utilise a basket of metrics to capture the range of geographic and socio-economic contexts in which schools operate. The review will be considered in due course by the Cabinet Secretary for Education and Skills.

It has been highlighted by some local authorities that they are making very effective use of SEF allocations. Amongst the best uses has been to increase the capacity of central improvement teams and offering professional development opportunities to the education workforce to drive improvement. Running counter to this is the situation facing a number of schools which previously benefited from targeted SAC funding (some in the region of £250k per annum) but have now lost that specific additional allocation. The level of deprivation amongst their learners and their families remains as intense as it was before the money was withdrawn. Consideration should be made to addressing this removal of supportive funding while bearing in mind the recognised need to increase the capacity of local authority education teams.

In discussion with school leaders around the future of PEF, their aspirations for empowerment and subsidiarity to optimise impact have been expressed thus.

• Funding must be additional to the core funding levels required for schools to operate.
• Funding should be assured for a minimum of three years, and ideally over the course of a Parliamentary term. This would facilitate the embedding of longer-term strategies to support young people whose diverse and in some cases profound needs cannot be fully met in the short term.
• Spending decisions should be at the discretion of school leaders, in consultation with the school community and the local authority. That community should formally include the parental body and the learners.
• For the sake of economies of scale, procurement should be managed through the local authority. Leaders would not, however, welcome local authority staff vetoing or directing PEF spend outwith statutory or legislative regulations. Decisions should be made by those closest to the learners.
• This approach in turn enhances participative local democracy
• PEF allocations to schools should be ring-fenced to those schools, with appropriate tracking of allocations included in overall Devolved School Management of funds
• School leaders accept that greater autonomy results in greater accountability, and realise that the public purse must be utilised in accordance with Best Value principles.
• School leaders further accept that if their local authority is expected to administer the provision of PEF, the costs of this should be recognised through a national formula agreed by key stakeholders.
• Other so-called ‘top-slicing’ should not take place to fund other aspects of provision (Top slicing would be defined as the re-direction of a proportion of funds without appropriate consultation and agreement. Provisions within PEF arrangements currently include an expectation of such an explicit agreement from school leaders.^[67]

In relation to the calculation of PEF quantum to schools, school leaders have commented thus:

• Greater consideration should be given to the contextual socio-economic circumstances of the school, with particular reference to financial poverty. Specifically, account should be taken of the proportion of learners experiencing financial deprivation and this should be integrated into the funding formula. This rationale acknowledges that learners attending a school with a small proportion of disadvantaged pupils are likely to be positively influenced by their peers. Thus, this proposal goes beyond funding per individual pupil, and recognises the substantial influence of school context on the educational effects of poverty.
• Additional contextual funding may take the form of a contextual ‘top-up’ to schools in which greater than say, 50% of learners are entitled to funding, with stepped enhancement for greater proportions.
• Whilst this may result in lower universal ‘per pupil’ funding, disbursement would ultimately be fairer

Recommendation F4

Pupil Equity Funding (PEF) and future iterations should continue to be ring-fenced.

• PEF and future iterations should continue to be treated as additionality in principle and practice, and its use remain largely at the discretion of the school leader and school community.
• Based on the principle of subsidiarity, school leaders should – in consultation with their local authority – be able to carry forward PEF monies for longer-term strategic purposes. While this provision is set out in current guidance, adherence should be monitored closely during the lifetime of PEF and updated iterations.

Recommendation F5

Review the formula used to calculate PEF allocations, taking account of not only the number but also the proportion of the school roll who qualify under updated metrics. Allocations based on these proportions should be made on a sliding scale.

Recommendation F6

To better co-ordinate the provision of 3-18 curriculum, pedagogy and assessment practices and to strengthen school cluster partnerships:

• Strong encouragement should be given to devolving a proportion of funding to whole school clusters / associated school groups / ‘learning communities’.
• This would require the co-ordination of PEF funding and the targeting of interventions on a wider ‘all through’ model.
• A beneficial consequence of this would be the streamlining of assessment approaches, tracking methods and transition practices within each school group.
• In this model, a co-ordinating manager would be appointed by the membership of each group to oversee effective use of the funding. Accountability for quality of inputs and linked outcomes would be assigned as appropriate.
• This approach mirrors that taken successfully in many local authorities in relation to the disbursement of Strategic Equity Funding (SEF).

Whichever form PEF is to take post-2026, it should not be subjected to the levels of red tape that are currently imposed on schools in some local authorities. Of course it makes perfect sense (in addition to abiding by Best Value principles) to seek economies of scale. For example, employing 20 family support workers collectively for 40 schools instead of recruiting for 40 x 0.5fte individual family support workers brings efficiencies. Local authorities would be fully justified in taking an oversight role to deliver such an efficiency. However, schools should be able to use a streamlined ‘business case’ process to justify why they need family workers in the first place, rather than feeling like they are jumping through unnecessary hoops to spend monies that were directed to their school by Scottish Government in line national policy.

Assuming compliance with legal and statutory requirements, there should be a very high probability of school business cases being accepted. This adheres to the principles of empowerment and subsidiarity agreed following the Governance Review and enshrined in the Governance Joint Agreement (2018).

Recommendation F7

Bureaucracy around PEF spend should be rebalanced and reduced while incorporating statutory and legal compliance, recognising the subsidiarity of decision-making.

• The role of local authorities emphasised as strategic advisors and professional facilitators
• Cognisance to be taken of the cost to local authorities of providing the pertinent procurement services, either through payment or transparent top-slicing at source, by mutual agreement.

Devolved School Management

Despite the importance of PEF funding to schools, including enshrining the principles of empowerment and subsidiarity, it forms a relatively small proportion of their overall funding. Between 90% and 95% of school funding should in theory be disbursed to schools through the Devolved School Management (DSM) arrangements that are in place in each local authority. A laudable set of DSM guidelines was co-created by key stakeholders to support the Governance Review and the Headteachers’ Charter^[68] and the linked Joint Agreement (2018) undertaken by Scottish Government and COSLA.

DSM guidelines in summary:

• Empowerment of Headteachers to meet local needs and deliver the best possible outcomes for learners, aligning with pertinent national and local education policies
• Founded on the principles of subsidiarity, openness, transparency, and local accountability
• Flexibility and Autonomy, based on the presumption that Headteachers and school staff are given maximum flexibility and autonomy to make decisions that best suit local circumstances while adhering to necessary regulations
• The DSM scheme to be continuously reviewed and refined to reflect the changing socio-economic and policy context
• Underpinning the framework is the aim to deliver Excellence and Equity through education provision.

While the guidelines are welcome, clear and helpful, designed to enable school leaders to plan and allocate resources to raise attainment, their implementation across the nation is extremely variable. The local authorities in which DSM guidelines have been implemented should be openly commended. Unfortunately, this is not universal, with many Headteachers stating that only selected elements of the guidelines are in place in their local authority. In relation to Section 1 the Principles, Section 2 of the detailed guidance and Appendix A the summary of expectations, school leaders report significant shortcomings in implementation.

In some parts of the country, it is often the case that school budgets are allocated, then frozen later in the year. In practice this means that some schools are not able to spend the funding that has been stated to elected members and local citizens. In the worst case, Headteachers were not provided with the budget for their school until the 11^th month of the financial year. The consequential level of uncertainty – bearing in mind the attendant penalties that are imposed when schools overspend – makes managing a school budget with any level of confidence extremely challenging. Headteachers aiming for excellence are substantially impeded by this level of uncertainty over the resources at their disposal.

Transformational improvement at pace depends on effective strategising and deploying innovative approaches. The latter inherently carries a greater risk of failure. Trialling new approaches can only be deemed innovative if they work, so they must be trialled. Inevitably some trials do not succeed. Although educators understand that failure, and learning from mistakes, are necessary and inevitable elements of improvement, financial instability or uncertainty leads to risk aversion. Without the psychological safe space to fail, those charged with making decisions will lean into safety, orthodoxy, compliance and conformity over higher risks and higher rewards, despite being aware that the pace of improvement will decrease.

Financial uncertainty has implications that affect much more than balance sheets: it not only deprives learners and their schools of resources, it stifles innovative practice and creative curriculum design, blocks transformative leadership and slows down longer-term improvement. Without the full implementation of DSM as jointly agreed this describes the situation affecting many of our schools.

At the level of individual schools this is clearly not ideal. When it happens across and at various levels of a system, even if the direction of travel is right, the pace of the journey will certainly be slower than intended. This, broadly, captures how Scotland is faring at present. If Headteachers do not feel confident about the level and flexibility of funding at their disposal they will not take calculated risks, and the development of more effective approaches is stifled.

For the same reason longer-term cultural change is suppressed, particularly when seed funding is required. For example, when moving to a distributive leadership style with the aim of encouraging greater levels of community participation a Headteacher is likely to set aside monies for bids and recommendations that come from learners, parents and staff. If there is uncertainty over the school budget and minimal flexibility over spending decisions such an initiative would simply not get off the ground.

The lack of an appropriate funding framework for schools goes beyond monies: it is a significant obstruction to culture change leading to educational improvement at school and system level.

Recommendation F8

Implement national Devolved School Management (DSM) guidelines in totality taking account of the scheme’s recognition of the benefits of local adjustments, thus significantly improving transparency and financial accountability.

• The extent and impact of implementation to be evaluated by HMI Inspectors by 2027/28 and regularly thereafter.

Recommendation F9

Ensure the provision of bespoke administrative support and services to schools.

• Reflecting the particular context of schools in relation to financial management, staffing and recruitment, HR, legal advice, health and safety amongst others.
• The cost of this to be reimbursed to the provider.

Funding recommendations

Recommendation F1

At national level Scotland should define what constitutes education spending, including statutory duties, and ring-fence this when disbursing to those charged with delivery.

Local authorities should clearly define what is included in education funding and improve the ease with which citizens can track the provision and the outcomes that result from that provision. When calculating revised general revenue grant funding allocations for the provision of education services:

• Existing formulae should be used in the first instance, adopting pupil roll and geographical context from current methodology as core variables.
• National government and local authority providers should co-create future iterations of the funding formula to best reflect and adapt to changing conditions.

Recommendation F2

There should be clear tracking and transparency of monies allocated to school education from national government grants, through local authorities and within schools, closely adhering to the principles and expectations of the Scottish Public Finance Manual^[1].

• Current and ongoing recommendations of the Audit Commission should be prioritised, with particular reference to mechanisms that support public access to, and understanding of, local government financial plans and statements.
• Embed increased accountability for key participants to enhance both financial probity and financial best value from the public purse.

Recommendation F3

Integrate well-defined process Key Performance Indicators (KPIs) into the evaluation of local authority education provision, for self, peer and independent external application. The purpose of this would be to evaluate the impact of practice and through this the value for money spent from the public purse. For the impact of this recommendation to be optimised, external scrutiny based on the HGIOEA KPIs (I4) would need to be adopted.

Illustrative examples of enhancements to existing process KPIs in HGIOEA may include:

• Levels of teacher vacancies, stage and subject areas, and length of vacancy. Number of applicants per vacancy.
• Devolved School Management of Funding: Adherence to the national guidelines, evaluated through qualitative data from leaders as well as scrutiny of accounts.
• Teacher satisfaction and agency levels: Measures the working environment from the perspective of practitioners.
• Parental satisfaction rates across key areas of provision.

Recommendation F4

Pupil Equity Funding (PEF) and future iterations should continue to be ring-fenced.

• PEF and future iterations should continue to be treated as additionality in principle and practice, and its use remain largely at the discretion of the school leader and school community.
• Based on the principle of subsidiarity, school leaders should – in consultation with their local authority – be able to carry forward PEF monies for longer-term strategic purposes. While this provision is set out in current guidance, adherence should be monitored closely during the lifetime of PEF and updated iterations.

Recommendation F5

Review the formula used to calculate PEF allocations, taking account of not only the number but also the proportion of the school roll who qualify under updated metrics. Allocations based on these proportions should be made on a sliding scale, rather than on a cliff edge model.

Recommendation F6

To better co-ordinate the provision of 3-18 curriculum, pedagogy and assessment practices and to strengthen school cluster partnerships:

• Strong encouragement should be given to devolving a proportion of funding to whole school clusters / associated school groups / ‘learning communities’.
• This would require the co-ordination of PEF funding and the targeting of interventions on a wider ‘all through’ model.
• A beneficial consequence of this would be the streamlining of assessment approaches, tracking methods and transition practices within each school group.
• In this model, a co-ordinating manager would be appointed by the membership[ of each group to oversee effective use of the funding. Accountability for quality of inputs and linked outcomes would be assigned as appropriate.
• This approach mirrors that taken successfully in many local authorities in relation to the disbursement of Strategic Equity Funding (SEF).

Recommendation F7

Bureaucracy around PEF spend should be rebalanced and reduced whilst incorporating statutory and legal compliance, recognising the subsidiarity of decision-making.

• The role of local authorities emphasised as strategic advisors and professional facilitators.
• Cognisance to be taken of the cost to local authorities of providing the pertinent procurement services, either through payment or transparent top-slicing at source, by mutual agreement.

Recommendation F8

Implement national Devolved School Management (DSM) guidelines in totality taking account of the scheme’s recognition of the benefits of local adjustments, thus significantly improving transparency and financial accountability.

• The extent and impact of implementation to be evaluated by HMI Inspectors by 2027/28 and regularly thereafter.

Recommendation F9

Ensure the provision of bespoke administrative support and services to schools.

• Reflecting the particular context of schools in relation to financial management, staffing and recruitment, HR, legal advice, health and safety amongst others.
• The cost of this to be reimbursed to the provider.