8 October 2009
Schools Secretary Ed Balls claims he can cut £2bn from the education budget. So how is he going to do it, asks Conor Ryan
When the Sunday Times splashed Labour’s plans for cuts in schools recently, the story was no revelatory leak. Rather it was an attempt by Schools Secretary Ed Balls to wrong-foot the Conservatives on spending ahead of the party conferences.
Having spent months contrasting Labour investments in education and health with Tory cuts, ministers now recognise that they must find savings in their own budgets if they are to protect frontline services and remain credible with voters.
A leaked report commissioned by Balls’s Department for Children, Schools and Families from WH Smith chief executive Richard Handover – which suggests that schools could cut their budgets by 6% without hurting standards – shows there is clearly potential for savings.
But this didn’t mean that the plan to save £2bn was uncontroversial. There was a predictable backlash from teachers and head teachers’ leaders. And, despite the new cuts narrative, there are real questions hanging over both main parties’ spending plans.
English school spending has risen by 56% in real terms since Labour was elected, lifting it from 4.9% to 5.9% of gross domestic product. Spending per student is now above the Organisation for Economic Co-operation and Development average for industrialised nations. Using 2006 figures, the OECD estimates UK spending at $7,732 per pupil, against an average of $6,437, and in secondary schools at $8,763 against the $8,006 average. Even so, primary class sizes remain comparatively large in England at 25.4: only Turkey and South Korea are greater.
But this record is threatened as the DCSF looks for savings, though any cuts would be recycled to other services. Prime Minister Gordon Brown assured Labour’s conference that school spending would continue to rise if Labour were re-elected. Balls told the conference: ‘We will make efficiency savings and ensure value for money. That is the only fair way to protect our frontline priorities.’
The Pre-Budget Report in November could be used to set out future spending plans for each department. Further improvements seem unlikely. ‘We can only, I think, in tougher times, keep delivering at the front line for families and for children in our schools if we find savings,’ Balls told the BBC’s Politics Show last month.
The detail behind his £2bn savings plan reflects the Audit Commission’s June recommendations. Three areas highlighted were school leadership posts, excessive reserves and better procurement. Yet each presents significant problems.
Take school reserves. Audit Commission chair Michael O’Higgins said: ‘Nearly 40% of schools are sitting on unnecessarily large surpluses – cash that could be spent on pupils.’ While recognising that a small reserve represents good financial management, the commission estimates that £560m of the £1.76bn held in reserve by schools is excessive. But when former schools minister Jim Knight tried to put a 5% levy on all reserves in 2007, he was forced to withdraw. Ministers might try a more targeted approach, but they will still face the opposition of schools that believe they should not be penalised for greater efficiency.
It is assumed that a bigger portion of the savings will come from better procurement. The Handover report described how one school spent £35,000 on a £1,000 photocopier. Yet, with local management of schools, each school is responsible for its own budget. Many pool procurement for computers, stationery, electricity and insurance, but ministers believe that budgets could be cut by 10% if they did so more effectively. This would release £780m a year from their £7.8bn spend. But without eroding school independence, government has few levers, aside from directly cutting grants to schools.
Under the most controversial of the three proposals, schools would share senior staff and head teachers in smaller primaries, saving an estimated £275m. But the focus on such federations as cost-cutters has dismayed many head teachers. Until now, federations and executive heads have been seen as a way of tackling school failure, rather than cutting costs.
Vicki Paterson, head teacher of 245-pupil Brindishe Primary School in Lewisham, became executive head of her own school and of the nearby Hither Green School, after Ofsted had given the latter a notice to improve in 2007. Under her leadership, Hither Green has improved, the proportion of children reaching the expected Level 4 in English has risen from 55% to 83%, with a similar improvement in maths.
But while Paterson believes that federations can boost results, and reduce duplication through sharing staff, she doesn’t see significant financial savings, especially as there is an extra layer of leadership, since both primaries are run on a day-to-day basis by assistant heads.
‘We’ve seen rapid progress [at Hither Green] as a result of working in partnership with Brindishe,’ she says. ‘But I wouldn’t ever suggest that the real value of executive headship is in making savings – it is in making progress.’
Her view is echoed by John Dunford, the general secretary of the Association of School and College Leaders. ‘There are good reasons why some comprehensive schools federate, but it would be disastrous if this policy is pursued by the government as a means of saving money on school leadership positions,’ he said.
A more promising route for savings might lie in the growth of school business managers, the new name for bursars. Not only do they make head teachers’ lives easier, they can cut costs. Fishburn Primary School in Durham has joined with four other primaries to employ a business manager, who has already identified potential savings worth £30,000 a year from the schools’ collective £3.5m budget. She has also helped secure better contracts for repairs of school toilets and kitchens, saving £12,000 in Fishburn’s own capital budget. The partnership cuts teacher training costs, as guest speakers are pooled, and allows joint bids for government initiatives.
‘As heads, we’re not trained to be business people,’ says Fishburn head teacher Danny Eason. ‘Better use of money can be made in schools.’
Many business managers are trained by the National College for Leadership of Schools and Children’s Services. Chief executive Steve Munby says: ‘School business managers can be worth their weight in gold, freeing up heads to lead teaching and learning, while managing resources efficiently.’ But financial savings might not be huge: the Durham business manager earns £45,000 a year – more than the savings identified to date.
As Balls seeks generic savings, the Conservatives have set their sights on cutting quangos and government initiatives. They would abolish the Qualifications and Curriculum Development Agency, and reduce the roles of the Training and Development Agency for Schools and Ofsted. But savings could be limited where functions transfer to the DCSF. Moreover, Conservative plans to create 220,000 extra school places to increase choice would cost more – not less – money, as would a planned premium for each disadvantaged pupil.
In any case, the big spending item in schools is staffing. Since neither party wants frontline redundancies or larger class sizes, the only other way to reduce spending is to curb the pay of the 441,000 teachers, 183,000 teaching assistants and 162,000 other staff employed in schools.
Labour has doubled teaching assistant numbers, seeing them as a way of improving adult:pupil ratios in classrooms. Handover said 40,000 teaching assistants’ posts should go and that others should be trained in teaching roles. A recent Institute of Education report suggested that poorly trained assistants hold back pupils’ development. But ministers defend the role of the often low-paid support staff – teaching assistants earn an average £758 a month – and reject proposed staffing cuts.
So, teachers’ pay and pensions could be in the sights of a future chancellor. With full-time teachers now earning an average of £35,000 a year, 19% more in real terms than in 1997, the pay bill is £21bn annually, a significant proportion of the £39.4bn spent on schools and sixth form colleges.
Teachers’ pay is currently set for three years, with a final 2.3% increase due in September 2010.
But the Conservatives would introduce a one-year pay freeze from 2011 for all public servants earning more than £18,000. This would affect teachers and head teachers alike. Labour has not yet gone so far – announcing a pay freeze for higher earning public servants from 2010 – but there is an implicit threat that this could be extended once a number of three-year deals have completed.
A freeze on teachers’ pay would currently save £1.2bn a year compared with a 2% annual rise. But it would require the independent School Teachers’ Review Body to face down strong union opposition. The Conservatives might abolish the body and give schools the power to negotiate their own deals, but Labour’s performance-related pay reforms showed that schools are better at paying premiums than keeping pay costs down when they have the power to do so.
Reining in pensions could be easier. The cost of the teachers’ pension scheme has mushroomed from £6.6bn in 2003/04 to £10.3bn this year. Teachers contribute 6.4% of salary to a scheme in which employers contribute 14.1%. The Liberal Democrats’ finance spokesman, Vince Cable, has argued that employee contributions should be increased in public sector pensions. In Ireland, which has a similar pension scheme, all public sector staff now pay a pension levy of around 7% of their income. A similar measure in England would raise £1.5bn a year.
Schools have enjoyed unprecedented extra money for a decade, funding a boom in recruitment and better teacher pay. But as government pays for the excesses of the financiers whose taxes partly funded the boom, teachers might now have to subsidise the clear-up.
Conor Ryan was senior special adviser on education to Tony Blair and David Blunkett. He blogs at conorfryan.blogspot.com