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In exercise of the powers conferred on the Secretary of State by sections 46, 47, 48(1) and (2), 138(7) and (8) and 144(1) and (2)(g) of, and paragraph 1(7) of Schedule 14 to, the School Standards and Framework Act 1998[1] the Secretary of State for Education and Employment, as regards England, and the Secretary of State for Wales, as regards Wales, hereby make the following Regulations, a draft of which has been laid before, and approved by, each House of Parliament:

"the 1996 Act" means the Education Act 1996[2];

"the 1998 Act" means the School Standards and Framework Act 1998;

"the 1998 Regulations" mean the Education (Grant-maintained and Grant-maintained Special Schools) (Finance) Regulations 1998[3].

    (4) In these Regulations "maintained school" means - 

(a) in relation to the period ending immediately before 1st September 1999, a county, voluntary, maintained special, grant-maintained or grant-maintained special school within the meaning of the 1996 Act; and

(b) in relation to the period beginning on 1st September 1999, a community, foundation or voluntary school or a community or foundation special school.

    (5) In these Regulations a reference (however framed) to a county, voluntary or maintained special school within the meaning of the 1996 Act includes a proposed school proposals for the establishment of which have been published under section 35, 41 or 339(1) of the 1996 Act but not yet implemented and which has a temporary governing body.

    (6) In these Regulations a reference (however framed) to a community, foundation or voluntary school or a community or foundation special school includes a proposed school which on implementation of proposals under section 35, 41 or 339(1) of the 1996 Act or section 28 or 31 of, or paragraph 5 of Schedule 7 to, the 1998 Act will be such a school and which has a temporary governing body.

    (7) In these Regulations a reference to a governing body includes the temporary governing body of a proposed school falling within paragraph (5) or (6).

    (8) In these Regulations a reference to a primary or secondary school - 

(a) in relation to the period ending immediately before 1st September 1999, means a primary or secondary school which is a county, voluntary or grant-maintained school within the meaning of the 1996 Act; and

(b) in relation to the period beginning on 1st September 1999, means a primary or secondary school which is a community, foundation or voluntary school.

    (9) In these Regulations a reference (however framed) to schools maintained by a local education authority does not include schools which are not maintained schools as defined in paragraph (4).

    (10) In these Regulations a reference to the permanent exclusion of a pupil is a reference to his permanent exclusion as defined from time to time for the purposes of section 494 of the 1996 Act[4].

    (11) Unless the context otherwise requires, words or expressions used in these Regulations set out in the first column of the following table shall have the meanings attributed to them by the provisions set out opposite thereto in the second column.

budget share	section 47(1) of the 1998 Act
delegated budget	section 49(7) of the 1998 Act
expenditure	regulation 2(2) of these Regulations (for the purposes of Part II of these Regulations)
financial year	section 579(1) of the 1996 Act
formula	regulation 10 of these Regulations
individual schools budget	section 46(2) of the 1998 Act
key stage	section 355 of the 1996 Act
local schools budget	section 46(1) of the 1998 Act
maintained school	regulation 1(4) of these Regulations
maintenance grant	sections 244(1) and 250(1) of the 1996 Act
nursery school	section 6(1) of the 1996 Act
permanent exclusion	regulation 1(10) of these Regulations
scheme	section 48(5) of the 1998 Act (in relation to the period on and after 1st April 1999) or section 101(1) of the 1996 Act (in relation to the period before 1st April 1999)
school maintained by a local education authority	regulation 1(9) of these Regulations
school year	section 579(1) of the 1996 Act[5]
special educational needs	section 312(1) of the 1996 Act.

    (12) Unless the context otherwise requires, a reference in these Regulations to a numbered regulation or Schedule is a reference to the regulation of, or Schedule to, these Regulations so numbered and a reference to a numbered paragraph is a reference to the paragraph so numbered in the regulation or Schedule in which the reference appears.

Exceptions
     3. A local education authority's local schools budget shall not include the following classes or descriptions of expenditure - 

(a) expenditure in connection with nursery schools;

(b) expenditure in connection with any provision made for children who have not attained the age of five except where such provision is made at a maintained school or the expenditure is by way of fees paid under section 320 or 348 of the 1996 Act (special provision for children with special educational needs);

(c) expenditure in making payments to another local education authority pursuant to section 492, 493 or 494[6] of the 1996 Act (recoupment between authorities);

(d) expenditure which the authority capitalise in their accounts in accordance with proper practices being those accounting practices - 


(i) which the authority are required to follow by virtue of any enactment, or

(ii) which, whether by reference to any generally recognised published code or otherwise, are regarded as proper accounting practices to be followed in the keeping of the accounts of local authorities, either generally or of the description concerned,



but in the event of any conflict in any respect between the practices falling within sub-paragraph (i) above and those falling within sub-paragraph (ii) above, only those falling within sub-paragraph (i) above are to be regarded as proper practices[7];

(e) expenditure offset by income received from Her Majesty's Chief Inspector of Schools in England or Her Majesty's Chief Inspector of Schools in Wales; and

(f) expenditure for the purposes of section 26 of the Road Traffic Regulation Act 1984[8] (arrangements for patrolling school crossings).

Individual schools budget for local education authorities in England
     4. A local education authority in England may deduct from their local schools budget any or all of the classes or descriptions of planned expenditure set out in Schedule 1, in whole or in part, in order to arrive at their individual schools budget for a financial year.

Individual schools budget for local education authorities in Wales
     5.  - (1) Subject to paragraphs (2) to (4), a local education authority in Wales may deduct from their local schools budget any or all of the classes or descriptions of planned expenditure set out in Schedule 2, in whole or in part, in order to arrive at their individual schools budget for a financial year.

    (2) Paragraphs 23, 25, 29, 39 and 42 of Schedule 2 do not apply in relation to planned expenditure in respect of schools which are, or were immediately before 1st April 1999, grant-maintained schools.

    (3) In the case of planned expenditure in respect of other maintained schools, planned expenditure of a kind referred to in paragraphs 23, 29, 39 and 42 of Schedule 2 - 

(a) may not be deducted by an authority from their local schools budget for the financial year beginning on 1st April 1999 unless expenditure of the same class or description in the financial year beginning on 1st April 1998 did not form part of, or was deducted pursuant to the terms of the authority's scheme (within the meaning of the 1996 Act) as then in force from, the authority's general schools budget (within the meaning of the 1996 Act) for that financial year; and

(b) may not be deducted by an authority from their local schools budget for any financial year beginning after 1st April 1999.

    (4) Planned expenditure of the kind referred to in paragraph 25(a) of Schedule 2 in relation to secondary schools may not be deducted by an authority from their local schools budget for any financial year beginning after 1st April 1999.

    (8) A local education authority may adjust the number of registered pupils used to determine a school's budget share where it is appropriate to do so in order to take into account, wholly or partly, the permanent exclusion of a pupil from the school or the admission of a pupil following his permanent exclusion from another school maintained by a local education authority.

Places
     12. In determining budget shares for special schools, or for primary or secondary schools with places which the authority recognise as reserved for children with special educational needs or for children in nursery classes, the local education authority may take into account in their formula the number of places which they wish to fund at those special schools or the number of places of the kind described above at those primary or secondary schools and in both cases may take account of the special educational needs in question.

Schools of a particular description
     13. Where a local education authority deduct from their local schools budget planned expenditure which relates to maintained schools of a particular description, they shall include factors or criteria in their formula in respect of that planned expenditure in relation to maintained schools which do not fall within that description.

Discrimination by reference to category
     14. A local education authority shall not use in their formula any factors or criteria which discriminate between schools by reference to their category under the 1998 Act or their category under the 1996 Act except where - 

(a) in relation to the period before 1st September 1999, differences in the functions of the governing bodies of schools in their categories under the 1996 Act; or

(b) in relation to the period on and after 1st September 1999, differences in the functions of the governing bodies of schools in their categories under the 1998 Act,

justify such discrimination.

Additional factors or criteria
     15. A local education authority may, in determining budget shares for schools which they maintain, take into account in their formula, as they consider appropriate, any or all of the factors or criteria set out in Schedule 3.

Budget share adjustments
     16.  - (1) Subject to paragraph (3), where a school's budget share (within the meaning of the 1996 or 1998 Act) or maintenance grant for the preceding financial year was - 

(a) determined by reference to an estimate of the number of registered pupils at the school; and

(b) differences between the estimated number of pupils on those dates and the actual number of pupils at the school on those dates were not taken into account in a redetermination of the school's budget share or maintenance grant for that preceding financial year,

the local education authority shall determine that school's budget share so as to take into account those differences.

    (2) Subject to paragraph (3) and regulation 21, a local education authority may determine a school's budget share so as to take into account any other change during the course of the preceding financial year in the data by reference to which the school's budget share (within the meaning of the 1996 or 1998 Act) or maintenance grant for that year was determined, if those changes were not taken into account in a redetermination of the school's budget share or maintenance grant for that preceding financial year.

    (3) Paragraphs (1) and (2) shall not apply to a school which received transitional funding under regulation 9 of the 1998 Regulations in that preceding financial year.

    (4) A local education authority may adjust the number of registered pupils used to determine a school's budget share where it is appropriate to do so in order to take into account, wholly or partly - 

(a) any reduction or increase in the school's budget share (within the meaning of the 1996 or 1998 Act) or maintenance grant for the preceding financial year, or any additional allocation in that year for the purposes of the school in accordance with the authority's scheme within the meaning of the 1996 Act, arising from the permanent exclusion of a pupil from the school or the admission to the school of a pupil permanently excluded from another maintained school; or

(b) any increase in the school's budget share (within the meaning of the 1996 or 1998 Act) or maintenance grant for the preceding financial year, or any additional allocation in that year for the purposes of the school in accordance with the authority's scheme within the meaning of the 1996 Act, arising from significant increases in pupil numbers during the course of the preceding financial year.

    (5) A local education authority shall include factors or criteria in their formula which satisfy the requirements of this regulation.