The purpose of this paper is to clarify the nature of the requests in the areas of both local finance and educational administration, in response to how the Dedicated School Grant was introduced in England from the 2006 financial year. The paper analyzes the institutionalization process of DSG mainly on the basis of changes in local finance and educational administration in and after the Thatcher administration. Firstly, this paper explains, on the basis of previous research, that the financial power of local government increased up until 1980, but after 1981, was undermined by the Thatcher administration. This paper also makes clear that the Blair administration, which came to power in 1997, has not taken a positive attitude in respect of strengthening local finances. Next, the paper shows how changes in the system of educational administration under the Thatcher administration undermined the power of LEAs, while strengthening central government and the authority delegated to schools. As for the role of the Blair administration, although some additions and modifications to educational administration systems were made in line with the concept of "the third way", fundamentally, policy followed on from that of the Thatcher administration. The role of LEAs was limited to providing support to schools and coordinating relations between schools, parents and the community. The Blair administration did not restore the financial power which LEAs had before the introduction of Local Management of Schools. In the spring of 2003, a school funding crisis occurred. Many school heads claimed that because of their budget shortage, it would be necessary to take such actions as making teachers redundant, shortening teachers' work time, discontinuing certain subjects and/or increasing class sizes. It was pointed out that the major cause for the crisis was to be found in the extra personnel costs caused by the expected implementation of a workload agreement with teachers and higher national insurance and pension contributions. LEAs blamed central government for failing to make adequate budgetary provisions in consideration of the rise in personnel expenses, while on the other hand DfES blamed the LEAs for distributing the school budget among other services. To resolve this crisis, in the 2004-05 financial year central government delivered the school budget to local government through the Revenue Support Grant (RSG) as in previous years, but as an exceptional measure, local government was instructed to draw up the school budget at a figure equivalent to or greater than the central government estimate. Central government institutionalized DSG from the 2006 financial year under the pressure of the need to make the school budget more stable and predictable. DSG is a ring-fenced grant to be used only for schools. DSG increases the power of central government to restrict local governments' freedom to control their own finances. In other words, it can be evaluated as centralizing still further the public finance system in England. This centralization is consistent with the policies followed under the Thatcher administration. From the point of view of local government administration, the institutionalization of DSG meets the needs of schools wishing to expand their freedom still more under the Local Management of schools and to secure greater transparency in their budgetary allocations. At the same time, it marks a further advance in the Blair administration's policy of restricting the role of LEAs. It seems to reasonable to conclude that DSG can be located in the line of succession from the local finance and educational administration policies implemented from the Thatcher administration onwards.
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