Redistribute schools’ cash to help struggling secondaries, think-tank urges

11 Jan 19

The government should consider redistributing funds from schools with ‘excessive’ surpluses to bolster those with weaker finances, an education think-tank has suggested today.

Analysis by the Education Policy Institute of Department for Education figures has highlighted that 30.3% of local authority maintained secondary schools were in deficit in 2017-18, almost four times that of 2014 (8.1%).  The total value of deficit balances of local authority maintained secondary schools in England in 2017-18 were £233m, the EPI said.

The average secondary school deficit was nearly half a million pounds and one in 10 local authority maintained schools has a deficit of more than 10% of their total income.

The proportion of special schools in deficit has almost doubled since 2014, the EPI found.

Despite the proportion of local authority schools in deficit increasing, the EPI noted the value of surplus balances “far exceeds” that of deficits balances.

The total value of surplus balances amongst local authority maintained secondary schools was £1.8bn, of which £580m was balances above the ‘excessive’ balance threshold.

An ‘excessive surplus’ is one that is above 5% of income in secondary schools or more than 8% in primary and special schools, according to the DfE.

The government has recorded 40.7% of primary schools, 46.4% of special schools and 34.1% of secondary schools as having ‘excessive’ surpluses.

The think-tank said that “in theory” 80% of local authority school deficits could be eliminated if local authorities were able to redistribute reserves from excessive balances within the authority into deficit balances.

Although, it admitted there would be “serious policy challenges” in attempting to do this.

Jon Andrews, report author and deputy head of research at the EPI, said: “Nearly a quarter of a billion pounds is in accounts deemed ‘excessive’ and uncommitted to any specific expenditure. The challenge for government, local authorities, and school leaders, is whether that money should now be redistributed.”

The institute recommended the government consider whether higher per pupil funding is needed, or whether efficiency savings can make up part of the current shortfalls.

David Laws, executive chair of the EPI, said: “The government needs to understand whether these trends are likely to be reversed by a growth in pupil numbers, or whether extra financial support will be needed in the Spending Review.” The Spending Review is due to take place later this year.

A separate panel discussion at the Local Government Association finance conference on Tuesday raised concerns over the education funding system.

John Betts, assistant director of finance and ICT, Warwickshire County Council, and panellist at the LGA event, called for a “fundamental review” of how education is funded.

Referring to an extra £350m SEND funding announced in December, Betts said: “The DfE doesn’t seem to do anything until there is a crisis. There are perverse incentives for schools that do not take on SEND children – the whole thing needs a fundamental review.”

A Department for Education spokesperson said: “Whilst the core schools and high needs budget is rising from almost £41bn in 2017-18 to £43.5bn by 2019-20, we do recognise the budgeting challenges schools face.

“That is why the Education Secretary has set out his determination to work with the sector to help schools reduce the £10bn they spend on non-staffing costs and ensure every pound is spent as effectively as possible to give children a great education.”

In December, education charity the Sutton Trust found that academies are failing pupils from disadvantaged backgrounds.

Comments on the EPI report:

Kevin Courtney, joint general secretary of the National Education Union, said:

“Cost pressures in the education system and the increase in secondary school pupil numbers mean more secondary schools will face a deficit in future years. There are 326,000 more pupils than in 2015-16 and yet there are 5,000 fewer teachers and 10,700 fewer staff over the same period.

“The Department for Education’s definition of ‘excessive balance’ is a 5% surplus for secondary schools. This is not ‘excessive’, as any business leader would tell you, and represents less than 10 days of a school’s running costs.”

Angela Rayner MP, Labour’s shadow secretary of state for education, said:

“The Conservatives have cut school budgets for the first time in a generation, yet they refuse to accept that this is creating a crisis in our schools, even as their own figures show the number of schools in deficit is skyrocketing.

“These cuts have made it impossible for many schools to even make ends meet, and there will be a generation of children paying the price for the Conservatives’ failure.”

Anntoinette Bramble, chair of the Local Government Association’s children and young people board, said: “Council-maintained schools can if absolutely necessary, run up a deficit on licence from the local authority, providing there is a full plan to show how the finances are going to be brought back into balance as soon as possible.

“This tends to happen if, for example, maintained schools have had to expand to meet demand for school places in their areas and are waiting for government funding to catch up with increased numbers of pupils.”

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