recognise for grant expenditure which conforms to the approved arrangements so long as it falls within the prescribed limit. The Board can conceive that some critics might object to any distribution of State funds in aid of Maintenance Allowances, but assuming that the policy of aiding maintenance allowances is approved, can any better method be suggested? The Board have not seen any suggestion for an alternative; and it would appear to them that the idea of distributing a fixed sum of money for that purpose without regard to whether the expenditure is incurred or not, and whether it is incurred under proper arrangements or not, would accord neither with economy nor with common sense.

9. PROVISION OF MEALS.

The problem of distributing a limited grant for the Provision of Meals was more difficult. The method which the Board are using is described in Paragraph 16 of the Memorandum on Control, and in Circular 1261 which is appended. The expenditure by Local Authorities on this service in 1921-22 exceeded £1,000,000 and the Government decided that the limit of expenditure to be recognised in 1922-23 must not exceed £300,000, which means, in effect, that the Board had £150,000 to distribute as grant in aid of this service. The service is by no means universal, and only about one half of the areas perform it. In those areas the expenditure fluctuates considerably from year to year. The Board have laid down in their Circular some general principles for restriction of expenditure, and propose to apply them area by area by the individual examination of the estimates of each Authority.

10. BOARD FAVOUR RETENTION AND DEVELOPMENT

OF THE PRESENT SYSTEM.

The Board, as at present advised, do not favour the abandonment of the present basis of their grant system for any other which has yet been suggested; they look forward to a further development of the system of applying standards of cost as limits to the expenditure which the Board should recognise for grant purposes. In the Board's opinion no alternative basis would be likely to meet the purpose unless it complied with the following conditions, all of which are found in the Board's present grant system.

(i) The grant should vary with the expenditure.

(ii) It should also vary with the ability of the locality to meet the expenditure.

(iii) The expenditure to be recognised for grant should be brought under suitable control by suitable standards.

11. GRANT FORMULA FOR ELEMENTARY EDUCATION DISCUSSED IN DETAIL.

While in general terms the Board's view is that the present basis of the grant system should be retained and that the standards of cost used for purposes of limit or control should be further developed, the Board do not by any means regard the present formula for the calculation of grant for elementary education as being incapable of improvement in detail. The following comments relate to detail.

(a) Education Act 1918, Section 44 (1) and (2).—The terms of Section 44 of the Education Act 1918, which governs the grant, might now well be simplified. The complication by which grants were in that Section classified as Substantive Grant and Deficiency Grant, Deficiency Grant being defined by reference to substantive grants payable in the year, have now become superfluous, and the substance of the Section could be more simply expressed. This would also simplify the Regulations.

(b) The 50 per cent. minimum.-The 50 per cent. minimum is a condition which has been introduced since the formula was originally constructed. It did not form part of the recommendations of Sir John Kemp's Committee; it found no trace in the Finance Bill of 1914. There was a 40 per cent. minimum in the expenditure grant which the Board introduced as from the 1st April, 1917. No minimum figured in the Education Bill 1917; but the 50 per cent. minimum was introduced into the Bill of 1918 (which in most respects was substantially the same as the Bill of 1917) and its introduction was due to pressure from the members of Parliament representing the Local Education Authorities and particularly the metropolis. If it were removed, those areas in which the produce of a penny rate is high would suffer by its removal, since it operates to counteract the effect of the rate-equalizing element in the formula.

(c) 36/- a child.-The item of 36 shillings a child which forms part of the formula for the grants for Elementary Education is probably in some need of revision. The original authors of the grant formula proposed a grant of 60 shillings a child plus 40 per cent. of the remainder of the expenditure in excess of 60 shillings a child. Mathematically a grant of 36 shillings a child plus 40 per cent. of the whole expenditure is identical with a grant of 60 shillings a child plus 40 per cent. of the expenditure in excess of 60 shillings a child, and it is a simpler way of expressing the same thing, and therefore was adopted in preference. The original authors of the grant formula described 60 shillings a child as a standard."

The Board of Education have never, in supporting the formula, regarded 60 shillings a child as in any true sense a standard rate of expenditure. It did represent at one time about the minimum expenditure in the areas where education was cheapest; but the search for a standard rate of expenditure expressed in

terms of shillings per child, is unavailing because of the great range of variations in the necessary cost as between one area and another.

The present item of 36 shillings per unit of average attendance serves a two-fold purpose. It acts as an inducement to increase the average attendance, i.e. to bring all the children into the school, and to keep them there regularly; and it also is important as giving to every area a considerable amount of grant not dependent upon expenditure. When any particular item of new expenditure is under consideration, the question is naturally asked how much of the new expenditure will fall on rates and how much on grants. If the grant formula did not contain this important element of 36 shillings per child, and if the total grant were the same, then presumably the percentages named in the formula would have to be increased; and consequently the incentive to local economy would be less strong than it is at present.

(d) Deduction of 7d. rate. The deduction of a rate of sevenpence in the £ was intended to secure some measure of rate equalization and does operate in that direction. But the rise in the cost of education has far more than counterbalanced the comparatively feeble effect of a sevenpenny rate in equalizing the rate burden. The distribution of rate burdens in consequence of the rise in the cost of education is more unequal now than it was in the year 1913-14 before this rate equalizing element was introduced.

Elementary Education.

1913-14 compared with 1920-21 in respect of the expenditure from rates (expressed as a rate in the £):

The serious state of affairs disclosed by this table ought to act as a strong warning to those reformers who would mend the present grant system by transferring burdens from taxes to rates. The Board of Education would look favourably upon any practicable proposal which might be brought forward for lessening the great inequality of the distribution of the rate burden over the several areas in England and Wales. But all proposals which are designed for that purpose necessarily have the effect of reducing the proportion of the expenditure to be met from rates in those areas where the rates are very high; and consequently those proposals encounter the strong objections which are, with justice, brought in the interests of economy against allowing any areas to control and direct the expenditure of public money without themselves contributing a substantial share.

(e) Maximum dependent on rate levied.-The maximum limit of grant is dependent on rate raised. This feature in the grant system was recommended by Sir John Kemp's Committee (see para. S6 A. of their Report of 1914, 7315). It has never been operative because there have been very few areas with a rate of less than one shilling in the £, since the present grant system was instituted, and in those areas the grant otherwise obtainable did not under the formula exceed two-thirds of the expenditure. It would be possible to revise this maximum limit so as to correspond more closely with the facts of to-day, i.e. to limit the grant in the areas in which the rate, as judged by present-day standards, is comparatively low. The table given on page 19 of the collection of tables submitted by the Board to Lord Meston's Committee will show how many Authorities would be affected by making a condition as to the rate burden being of a given amount.

(f) 60 per cent., 50 per cent., 20 per cent.-The various percentages in the formula for Elementary Education are 60 per cent. for Teachers' Salaries, 50 per cent. for Special Services and 20 per cent. for Other Expenditure. The Board think it quite an open question whether these differences should be retained. They give rise to complications and disputes about classification, and it is not by any means clear that they bring any counterbalancing advantages. It must however be remembered that an important interchange of letters, dated the 22nd January 1921, took place between Lord Burnham and the President of the Board with respect to the expectations which the Local Education Authorities might have, in adopting the Burnham Scales, as to the retention. of the formula by which 60 per cent. of the expenditure on Teachers' Salaries is taken as an element in the grant.

12. HIGHER EDUCATION GRANT DOES NOT VARY WITH ASSESSABLE VALUE.

The defect of the grant formula for Higher Education is that it makes no allowance for differences in the wealth or poverty of the Local Education Authorities. At present the expenditure on

The

Higher Education amounts to less than one-fifth of the total expenditure upon education, but if expenditure should expand the burden would press very heavily upon the poorer areas. defect here noticed could only be remedied either by distributing a larger amount of total grant for Higher Education or by redistributing the present amount. The Board are precluded from the first of these courses by the present financial stringency; and from the second by the law which secures to each authority a minimum of 50 per cent. of its recognised expenditure; for at present (with trifling and temporary exceptions) no area is receiving more than the statutory minimum.

13. RESIDUE GRANT NO LONGER EFFECTIVE. As has been explained in the descriptive memorandum (see page 16 of Volume 1 of the papers submitted by the Board to the Committee) the Residue Grant has now been submerged by the Board's consolidated grant, and no longer brings any benefit to the recipients. On the assumption that the Board's system of grants will remain unchanged in this respect, the Residue Grant will now be only a fossilised relic of the system of Assigned Revenues. The Board would have no objection to its removal, and consider that public accounts would be truer and simpler if it were removed, a consequent addition of £807,260 being made to the Board's vote. The Board are unable to say what the views of the Local Authorities would be as to such a proposal, but when the question was last mooted (at a time when the Residue Grant represented a real money benefit to them) they were opposed to its abolition.

14. COST OF ADMINISTRATION
CALCULATION

ARISES NOT ON
OF GRANT BUT IN
IN CONTROL OF
EXPENDITURE.

Less clerical labour is required for the calculation of grants on the present basis than on any other basis that has been in use in the Board of Education. The introduction of a single grant for Elementary Education and a single grant for Higher Education for each Local Authority, based on the expenditure, caused an increase in the staff of the Accounts Branch of the Board and a diminution in the other branches of the Board; and on the balance the work of calculation is less than it was formerly or than it would again be if the old grants were revived. But on the other hand, apart from calculation, the Board have undertaken a great deal of new work for the purpose of controlling and limiting expenditure. It might therefore perhaps be suggested that if the grant system were altered the Board could disavow any interest in the total cost of education and discontinue any administration directed towards controlling or limiting it, and that some administrative economy might thereby result. It appears to the Board that