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Education refunds set to avert legal challenge

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The Department for Education has announced it will repay £58m to councils, in a move expected to bring an end to a long-running legal dispute between local authorities and the government.

Plans published by the DfE on Tuesday showed it will refund about 40% of the £148m it transferred to academies to fund education services in 2011-12.

The move is the latest in a protracted dispute about the amount of money transferred from local authorities’ budgets to cover the costs of “central services” that councils do not fund for pupils being educated at academies, such as assessment of eligibility for free school meals and management of the admissions process.

The DfE announced that, in cases where the amount it deducted from councils’ formula grant in 2011-12 and 2012-13 was greater than it would have been if it were based on the number of pupils in academies, the money will be refunded. It will be welcomed by the authorities that had their funding top-sliced despite having no academy schools in their area.

In May 2011, 29 councils issued a judicial review, claiming that the amounts being transferred were too high. The legal action was put on hold pending further consultation.

Sources close to the judicial review told LGC the repayments from DfE would be enough to convince the local authorities to withdraw the legal challenge.

The LGA welcomed the refund, saying in a statement the measure would give councils “a sound basis on which to plan their spending for the rest of this year.”

However, it warned the funding methodology for 2013-14 and beyond was “flawed”.

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