The low down on Labours Free School meals costings

Given today’s Labour Manifesto contains the promise “To aid attainment, we will introduce free school meals for all primary school children, paid for by removing the VAT exemption on private school fees.” I thought it appropriate to take a closer look at their costings.

Labour appear to extrapolate their figures based on a House of Commons Library briefing paper, which does little more than state the current funding position. They then use the recent IFS report into their estimates to underpin their figures, even though IFS published after the policy was announced.

I am conscious of providing political ammunition, and will endeavour to analyse the other party’s commitments when they come out. But as it stands, I do not think the Labour FSM calculations add up. I think they are significantly underestimating the future cost of their proposed free school meals policy.

State of the Nation

The spending commitments all appear based on the current Universal infant free school meals (UIFSM) funding, which it turn use the 2012 Children’s Food Trust research data. The CFTs Seventh annual survey found the mean cost of providing a primary school meal in 2011\12 was £2.30.
The £2.30 was broken down as 67p on ingredients, 43p on overheads and £1.20 on labour. This figure became the de facto amount schools would receive per meal under UIFSM.

A mean cost of £2.30 will see some schools with higher costs and some lower. Under the current system, those with lower costs make a bit extra money each meal, however as you would expect, there are significant numbers of schools whose costs are higher than the amount they receive. To be clear, these schools are forced into subsidising their meal service from other budgets. This is particularly prevalent in smaller schools who can’t achieve economies of scale.

Since 2012 when these figures were calculated, we have seen significant food price inflation, we have also experienced unrelenting prices rises from the utility providers. But most significantly we have seen the adult minimum wage rise from its 2012 level of £6.08 to today’s £7.50.  Add onto this the extra National insurance and pension costs and an industry that is extremely labour intensive is confronting significant cost pressures.
The current picture for UIFSM is far from rosy, some schools being forced into making cuts to teaching because the £2.30 per meal isn’t enough and tales of caterers cutting back on quality as their costs rise against a fixed income.

Labour plans 

Looking forward and assuming a labour victory and the point where Jeremy Corbyn implements his Universal Junior FSM policy.

The first thing to note is that older children eat more, the cost of producing a meal for a 4 year old reception child is very different to that of a 11yr old in year six,  also inflation is on the rise again, all adding yet more cost pressures.

However it is wages that remain the biggest factor needing to be accounted for, because of the simple fact, if Labour win they have promised to increase the minimum wage to £10 per hour in 2020.

That’s around 65% higher than the £6.08 rate in force when the £2.30 per meal was calculated. With the research showing labour constituting over half the meal costs (52%), the rise in minimum wage would push labour costs up from its baseline of £1.20 to £1.97 around 86% of the grant, leaving  32p for ingredients and everything else. Basically, if the national minimum wage goes up, it simply becomes untenable for caterers to provide a meal for £2.30.

These cost increases would leave Labour with a difficult choice, do they leave the grant at £2.30 per meal and let schools to find the extra from their already stretched budgets, or do they bite the bullet and increase the meal funding in line with wages and inflation?
At this point, it is also worth remembering that any increase will not simply apply to the junior meals being promised, the implications also would also result in an increase to the infant free school meals grant, taking it beyond the current £600,000,000.

The real costs

It is obviously up to the new government to decide the level of grant it gives, but I prepared the following illustrations at different amounts.

A rise to £2.50 would make the ongoing cost of Labours junior school FSM policy £870m, add an extra £50m for infants and around £180m for the rest of the UK. Total £1.1 billion

A rise to £2.75 would be £950m add an extra £120m for infants and around £230m for the rest of the UK Total £1.3 billion

A rise to £3.00 would make the ongoing cost £1.03bn add an extra £190m for infants and around £280m for the rest of the UK Total £1.45 billion

A full catch up, using the 2012 base, adding inflation to the ingredients and utilities (2012-17 multiplier = 1.12) and the full pro rate rise in minimum wage would push the cost per meal up to £3.20

That would cost £1.11bn add an extra £235m for infants and around £320m for the rest of the UK Total £1.66 billion.

Infrastructure and Capital costs

Onto the capital costs, which will never be an exact figure, given not even the government knows the state of the school estate. On this Labour don’t appear to make any specific commitment, though the IFS appear to use the coalitions spending on the infant schools and proportion up from there.

The issue here is the amount spent on infants was known to be inadequate at the time, the implementation was rushed and political priorities overrode everything else. It is an area I have some specialised knowledge of, not least because I entered numerous FOI requests and saw hundreds of funding applications that were rejected.

The figures used do not take into account the schools who needed funding and didn’t receive any, or the extra funding put in by LAs and schools themselves.  I would contest the baseline UIFSM capital figure being used in significantly lower than it should be.

We must also consider how much capacity schools have to provide meals for all junior children. Because of UIFSM, many primary schools are running flat out, their kitchens can barely cope and the dining halls are full. Some now don’t allow juniors to have hot meals because they simply can’t cope.

Implementing Junior FSM would require the provision of significant extra capacity in both kitchens and halls. Schools have to plan and be able to cope with 100% take up. This would mean a number of schools needing new dining halls, and they don’t come cheap. There will also need to be a process of refitting and rebuilding kitchens as many are not designed to cope with these kind of high numbers.

It’s my view, the infrastructure costs for the 17000 primary schools would likely be in excess of a £1billion. I accept there is a degree of guesswork, but with a new hall starting at £500,000 and a new kitchen costing in excess of  £50,000, it won’t be hard to see costs quickly rise beyond the Billion pound mark.

Value for Money

Labour will undoubtedly need to raise the amount it pays schools for each meal. They will end up spending  3-5% of the whole schools budget on a policy that has no strong evidence base, does nothing for health and offers appalling value for money.  I cant for the life of me, conclude this is a priority for education.

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