I find the school's approach bizarre.
The Pupil Premium money is given to schools for every pupil on free school meals. It is based on evidence that pupils on free school meals have (on average ) lower school outcomes than those who don't.
It is of course a very rough measure, but it provides a simple way for the government to allocate more money.
Our school for example has 35% of pupils on FSM, which is higher than average, due to being in a deprived area.
Of course it is a crude measure, and the money can be spent in any way that the school likes, with one proviso, it must be spent to
narrow the gap in acheivement between the children receiving FSM and those not receiving it. If there is no gap, the school can spend it where it likes!
The school has to justify how it spends the money and the data will show how it is doing on whether it has closed the gap.
At our school the money is used for all the lowest acheivers, FSM or not, with the aim that all kids will get up to standard