The School Funding, Budget Statements and Outturn Statements (Wales) Regulations 2026: children's rights impact assessment

Changes are proposed to provide greater transparency, comparability and consistency in the school funding system, to allow informed budget discussions at all levels. They will also ensure they reflect current policy and legislation and update terminology accordingly.

We propose to revoke and remake the School Funding (Wales) Regulations 2010 (“the 2010 Regulations”), the Education Budget Statements (Wales) Regulations 2002 (“the 2002 Regulations”) and the Education (Outturn Statements) (Wales) Regulations 2003 into a new set of School Funding, Budget Statements and Outturn Statements (Wales) Regulations 2026 (“the 2026 Regulations”). Changes included in the 2026 Regulations include:

• The ability for federated schools to have a single federated budget.
• Local authorities’ funding formulae required to take into account an amount for each pupil in respect of a pupil’s eligibility for free school meals or a pupil’s residency in relation to the Welsh Index of Multiple Deprivation (WIMD). 
• Surplus school budget threshold values to be replaced with a percentage of 5% of the school balance.
• Local authority financial schemes must include a statement setting out how the local authority will monitor the use by a governing body of the surplus included in any surplus statement.
• Local authority financial schemes must contain a provision requiring a governing body to submit a deficit recovery plan to their local authority for approval and include the process in relation to a draft deficit recovery plan.
• Local authorities will be required to publish their financial schemes and their funding formulae on their website. 
• Local authority financial schemes must detail the areas of their school budget which are not delegated to schools, but are centrally retained by the local authority to spend on schools. 
• Amend date for return of budget outturn statements to 31 July. 
• Amend the budget statement to include Core Delegation, Discretionary Delegation and Additional Learning Needs (ALN) Delegations (which is further split into ALN Core Delegation and ALN Discretionary Delegation) columns and columns to record the estimated school’s budget share for the following two funding periods. 
• Combine Parts 2 and 3 of the budget statement as required by Schedules 2 and 3 of the 2002 Regulations and require that this is completed for each of the different delegated budget types for each school and type of school. 
• Move non-domestic rates (NDR) from the schools budget to the non-schools education budget. 
• The limit of 0.2% applied to licence fees or subscriptions in Schedule 2 to the 2010 Regulations, which lists what may be included in the schools budget (expenditure which may be delegated to schools or centrally retained by local authorities to spend on schools) will be removed. 
• Schedule 3 to the 2010 Regulations, which sets out additional factors or criteria which may be taken into account in a local authority funding formula, will be removed. Therefore, local authorities will be able to take into account in their formula any factor or criteria they feel appropriately relates to expenditure under the definition of the schools budget. Examples of appropriate factors and criteria will be contained in guidance.

The changes are unlikely to directly impact learners. The 2026 Regulations aim to increase transparency, consistency and comparability in the school funding system, to allow for more informed budgets discussions. This may lead to changes in school budget levels, which could indirectly impact on learners.

As a result of the 2026 Regulations, local authorities will need to review their local authority funding formulae to ensure continued compliance with those Regulations. Some of these reviews may lead to funding formulae being changed, which may alter individual school budgets, which may also indirectly impact on learners. 

However, the aim of amendments is to ensure a more equitable approach to school funding across schools to ensure funding and resources are allocated fairly and transparently for the benefit of all learners.

Decisions on the level of funding available to schools will continue to be made by each authority and they will continue to be responsible for ensuring the availability of suitable education provision in their area, for the benefit of all learners. Schools will continue to have the opportunity to influence their local authority’s decisions on school budgets by engaging in dialogue with authorities including through their budget forum. Once local authorities set budgets for their schools, management of those budgets is the responsibility of the school’s governing body.

The Welsh Government commissioned an independent review of school funding (The Review of School Spending) which was published in October 2020. This was to assess the different levels of funding required, in different circumstances, across schools in Wales. In response to this we are continuing to work towards addressing the recommendations of this review. The review highlighted the complexity of the funding system, and that work is needed to make this system not only more efficient but also more transparent. The review of school spending in Wales provides valuable evidence to inform future funding and policy decisions. We considered the evidence in this report when considering potential amendments.

Decisions on the level of funding available to schools will continue to be made by each authority and they will continue to be responsible for ensuring the availability of suitable education provision in their area, for the benefit of all learners. The 2026 Regulations aim to provide greater transparency, comparability and consistency in the school funding system, to allow informed budget discussions at all levels, for the benefit of all learners.

The Budgeted expenditure on Special Educational Needs (SEN) and Additional Learning Needs (ALN) provision: April 2025 to March 2026 indicates that total expenditure on SEN/ALN provision in schools by local authorities is budgeted to have increased by 12.8% compared with the previous year. We considered evidence in NAHT Cymru’s Falling Short: The deepening school funding crisis in Wales regarding its members feedback on ALN funding. Rising ALN demands and budget pressures is reflected from various other stakeholders, including local authorities. The Evaluation of the Additional Learning Needs system: survey of parents and carers, published on 14 October 2025, also reports on some views from parents and carers that a lack of funding is a concern.

The 2026 Regulations include provision for Core Delegation, Discretionary Delegation and ALN Delegations budget reporting in local authorities’ budget statement returns. This aims to increase transparency and understanding of funding, leading to informed discussions and decisions around school budgets, including ALN budgets, for the benefit of all learners.

The Review of School Spending reports that the impact of school budgets is reported in academic literature, which provide evidence that the effects of school spending on learner outcomes appears to be large across a range of countries, with a 10% increase in spending increasing outcomes by about 7 to 10%. It is suggested that the effects are potentially larger when this applies to disadvantaged children and there’s potential indications that earlier investment can have larger effects. However, impacts will be dependent on the context and how the extra spending is used.

The 2026 Regulations include provisions which require local authorities’ funding formulae to include a factor based on the incidence of social deprivation of pupils by taking into account an amount for each pupil in respect of a pupil’s eligibility for free school meals and (or) a pupil’s residency in relation to the Welsh Index of Multiple Deprivation (WIMD). This may impact on the funding a school receives for social deprivation and may impact on pupils who are disadvantaged. Whilst it will still be a matter for local authorities how much funding they choose to allocate, by making the allocation clearer this will enable more informed discussions about appropriate levels of funding required.

Specific engagement with children and young people was not felt appropriate in relation to the 2026 Regulations where those Regulations seek to improve transparency, consistency and comparability in the school funding system. The changes are unlikely to directly impact learners. Decisions on the level of funding available to schools will continue to be made by each authority and they will continue to be responsible for ensuring the availability of suitable education provision in their area, for the benefit of all learners. Any local authority amendments to school funding formulae will continue to be subject to consultation.

A consultation ran between 24 June and 2 September 2025 on proposed amendments for stakeholders to provide feedback. The consultation responses included points regarding ALN funding and deprivation funding and its impact on learners. Whilst the amount of funding allocated will still be a matter for local authorities, the increased transparency will enable more informed discussions about appropriate levels of funding required. It was recognised in consultation feedback that the proposed amendments will provide more consistent, comparable and transparent information, enabling any inequalities to be more easily identified and challenged. 

Evidence and recommendations from the reviews highlighted above, have informed amendments. There is clear evidence that simplified and transparent school funding is necessary in Wales and these amendments aim to take a step towards addressing this.

Local authorities will continue to be responsible for setting school budgets, however, the impact of different budget choices through increased transparency, consistency and comparability will be clearer and allow for discussions around appropriate school budget levels. This may lead to changes in school budget levels, which could indirectly impact on learners. 

As a result of the 2026 Regulations, local authorities will need to review their funding formulae to ensure continued compliance with those Regulations. Some of these reviews may lead to funding formulae being changed, which may alter individual school budgets, which may impact indirectly on learners. 

However, the aim of amendments is to ensure a more equitable approach to school funding across schools to ensure funding and resources are allocated fairly and transparently for the benefit of all learners, this could include learners with one or more than one protected characteristic. This could include learners with ALN, Black, Asian and Minority Ethnic learners and learners from low-income households. 

The increased transparency from the amendments will allow for more informed discussions around funding levels, for example, for children with ALN or that come from a low-income household. Whilst the amount of funding allocated will still be a matter for local authorities, the increased transparency will enable more informed discussions about appropriate levels of funding, which could indirectly impact learners and the resources available to them.

The proposals do not have effect on the overall levels of funding available, only on the formula used to distribute the available funding to schools. Decisions on the level of funding available to schools will continue to be made by each authority and they will continue to be responsible for ensuring the availability of suitable education provision in their area, for the benefit of all learners. Schools will continue to have the opportunity to influence their local authority’s decisions on school budgets by engaging in dialogue with authorities including through their budget forum. Once local authorities set budgets for their schools, management of those budgets is the responsibility of the school’s governing body. It is also possible that fluctuations to individual school budgets may be due to increased compliance with the 2010 Regulations where perhaps previously there had been misinterpretations.

To mitigate against impacts of any changes to school funding formulae, any amendments to school funding formulae will continue to be subject to consultation. Local authorities are required to consult with their schools forum and the governing body and head teacher of every school it maintains.

The 2026 Regulations also require local authorities, when determining a school’s budget, to take into account whether that budget would be reduced by more than 5% than the previous year’s budget. Where the local authority determines the school’s budget has reduced by more than 5% and decides to increase the funding to address the reduction, this must be done in accordance with a scale published by the local authority in its financial scheme, to maintain the transparency and equity.

Analysis of the impacts will inform ministerial advice.

Once a ministerial decision has been made this children’s rights impact assessment will be published.

Specific engagement with children and young people was not felt appropriate in relation to the 2026 Regulations to improve transparency, consistency and comparability in the school funding system. The regulations are technical and specialised in nature. The changes are unlikely to directly impact learners. 

Decisions around school budgets will remain up to local authorities and local authorities should continue to work with their maintained schools to evaluate the effectiveness of their school funding arrangements in supporting and raising the achievement of all learners. The 2026 Regulations will not directly impact overall school budgets, but the formula used to allocate the budget to individual schools. The 2026 Regulations aim to improve equity in the system. Schools will continue to have the opportunity to influence their local authority’s decisions on school budgets, including through their budget forum, which is required in law. 

Any amendments to local authority school funding formulae will continue to be subject to consultation. Local authorities are required to consult with their schools forum and the governing body and head teacher of every school it maintains.

Welsh Government will review this children’s rights impact assessment following local authority implementation in 2027 to 2028.