Tag Archives: finance

Making money from schools

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Why would anyone want to take the risk of running a ‘for profit’ school when there are so many easier way to make money out of state education? At one time, companies and foundations from the USA and Sweden were going to revolutionise schooling in England, while making a profit at the same time. Seems it didn’t happen quite that way. The academies that both the Erudition Schools Trust and the Learning Schools Trust opened have all been re-brokered away from the groups that originally founded them and now both of the groups are seemingly no more.

Another education experiment originally from the age of new Labour capitalism has bitten the dust. But, that doesn’t mean you cannot make money from schools. Books, furniture, resources, services such as accountancy, human relations, payroll and legal services, as well as construction and the maintenance of school buildings and facilities can all be offered at a profit. Then, as regular readers know, there is the recruitment industry that thrives on helping schools find staff.

Many years ago, in 1999 to be precise, the then Education Select Committee started an inquiry into ‘The role of private companies in the management and supply of state education services’. I don’t think it was ever completed.  I noted in my written submission that J S Mill had taken the view  in his essay  entitled On Liberty that the role of the state was to ensure the education of its citizens and not necessarily to operate the schools. The question was, and still is, how can The State achieve its end of educating its citizens without paying more of taxpayers’ money than is necessary?

The National Audit Office and the Public Accounts Committee are there to see that where possible public funds are used judiciously. I would say wisely, but I am not sure that is always the case. Mill, was convinced that the State should not necessarily run the service of education. But are politicians and these days, educationalists, any better at obtaining value for money if the service is run by others: sometimes not.

In 1999, I pointed out that the CEO of an education company with a turnover of £48 million earned £122,000 whereas a Chief Education Officer, remember them, of an authority with an education budget of more than £150 million didn’t even earn a six figure salary.  Presumably, the difference was the price to be paid for risk. You can find the same differentials today between CEOs of MATs and chief officers in local authorities, but with, in my opinion, less justification.

Some of us do try to challenge the orthodoxy, by taking the disruptive approach allowed by new technology. TeachVac www.teachvac.co.uk is one such attempt. Like Twitter, Facebook and many other on-line service sit is free to users and makes its money in other ways. In the case of TeachVac, analysing the growing amount of data and using it to provide additional paid services.

With growing concerns about school funding it is time to develop mechanisms for driving down private sector charges to schools. The government’s recent initiative in IT procurement is a good example of what can be achieved.

Apprenticeship Levy

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In the bizarre world that is education under the present Tory government, stand-alone academies with a payroll of less than £3 million are exempt from paying the new Apprenticeship Levy; all schools in any MAT with a payroll of over £3 million across the MAT will pay the levy, even if they are a small primary school; voluntary aided schools are probably exempt as the local authority is the de facto but not de jure employer so long as the school payroll is below £3 million, but all maintained schools will pay the levy regardless of the size of their payroll because the local authority is the employer, even though in these days of delegated budgets it has no control over spending by the schools.

This is a shambles that does a great discredit to the governance of education. If this is currently the position, it should be rectified forthwith. Either it is a tax on all schools or it isn’t. My position is that the government already takes out of education a sum needed to fund the training of new teachers and it should pray that cash in aid to the Treasury in order to have all state-funded schools exempt from the Levy. I don’t mind if the larger private fee-paying schools contribute since they often employ teachers whose training has been paid for initially by the State, but paid back by individuals through the tuition fee repayment schemes in operation since the late 1990s.

If schools are not exempted from the Levy, then they should make full use of benefits. Sadly, these are by employer, so a large county council with many maintained schools will pay a large sum in levy, but receive little back through the pay-out arrangements.

School budgets face enough other pressures at the present time, including for many small primary schools the loss of part of their block grant under the new funding formula arrangements. In Oxfordshire, the loss per schools equates to several thousands of pounds and may make the difference between survival or closure for village schools with less than 150 pupils.

I don’t know whether it is this government’s intention to redraw the map of primary schooling in England, but it could be well on the way to doing so if the combined effect of budget cuts and cost pressures make such schools unable to breakeven financially.

As I have hinted before, one solution is to downgrade the leading professional in small schools from a head teacher to a head of site paid on a lower salary. The risk is that any savings are then spent on a salary for an executive head teacher paid more than value of the savings. Whether deputy head teachers and other experienced teachers would be willing to take on the role of site leader for less money than the current head teacher will, I suspect, depend upon the terms and conditions offered, especially in the smallest of schools. However, unless some savings can be made, I fear for the future of many primary schools. Hopefully, I am being alarmist, but removing the Apprenticeship Levy from all school budgets would be a start.

 

More about Finance

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The well-respected institute for Fiscal Studies has published a document highlighting the effects of the pay freeze on the public sector since the recession hit in 2008. https://www.ifs.org.uk/uploads/gb/gb2016/gb2016ch6.pdf

In relation to education, the IFS comments that ‘The Department for Education (DfE) is planned to see a budget cut of 1.9% over the period 2015–16 to 2019–20, a smaller cut than planned for most other departments.’ However, over the whole period since 2010–11, the total DfE budget is expected to be cut by 8.5%. This is still low in comparison to the cuts inflicted on some other government departments where results such as the recent jail riots suggest cutting too far can have serious consequences.

One of the issues for education, with this level of public spending, is around pay. After all, education is still a people intensive activity, with relatively low levels of capital expenditure and technology only recently starting to play a significant role in the delivery of learning.

As the IFS makes clear, part of the real-terms cut to public service spending over the last parliament was achieved by holding down public sector pay. Indeed, as the authors of the IFS document remind readers, pay was frozen in cash terms for all but the lowest-paid public sector workers in 2011–12 and 2012–13, and pay awards were limited to 1% across most of the public sector in 2013–14, 2014–15 and 2015–16.

They note that since private sector wages were also growing slowly over this period, such pay restraint did not have a particularly adverse impact on relative wages. By 2014–15, average pay in the public sector was about the same level relative to the private sector as it had been in 2010–11, and still well above its pre-crisis (2007–08) level.

However, the IFS authors anticipate that going forwards, private sector wages are expected to grow more rapidly. The OBR’s latest forecast is that average earnings across the private sector will grow by around 17% (in cash terms) between 2015–16 and 2019–20. The government’s announced 1% limit on annual pay increases for a further four years from 2016–17 is therefore expected to reduce wages in the public sector to their lowest level relative to private sector wages since at least the 1990s. This could result in difficulties for public sector employers trying to recruit, retain and motivate high quality workers, and the IFS suggests, raises the possibility of industrial relations issues.

This confirms what the view this blog has taken ever since the four year deal on a one per cent per annum rise was announced, that where alternative graduate jobs exist in the private sector, teaching looks less enticing as an area of work than in the past. However, with the cuts in budgets, this may matter less if schools cannot afford to offer the same number of jobs.

As mentioned in earlier posts, what happens to the numbers leaving the profession will be the key to whether the recruitment crisis of recent years either eases or remains a problem in a range of subjects across much of the country? I expect English to be the subject to provide an early steer as the free pool of trainees is relatively smaller as a proportion of overall trainee numbers than in many subjects, so schools not involved in training new teachers may struggle to recruit in 2017.

Finance comes centre stage

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Up until 2017, education, and specifically the schools sector, has been a relatively easy ride for the government on the back of some historic funding levels that originated during the last Labour government and were largely protected under the coalition. Is 2017 the year when all this is set to change? Will parents start noticing the arrival of austerity in the nation’s schools or will they be persuaded that the new funding formula is actually providing additional funding for schools, especially in the more rural tory heartlands?

The Rural Services Network clearly subscribes to the latter view with a headline in their latest bulletin, Government plans will see small rural schools protected by a ‘sparsity’ funding factor’. http://www.rsnonline.org.uk/services/sparsity-funding-to-protect-rural-schools On the other hand, the NUT/ATL collaboration of teacher associations thinks differently according to their press release that combines the new funding formula with the recent National Audit Office publication to come to the conclusion that ‘school funding cuts [are] worse than predicted. JAMs [Just about Managing] hit hardest as school budgets plummet’. Clearly, this group remain a key target for those concerned with policy-makers.

The NUT/ATL press notice cites the following as average cuts for different groups.

Primary pupils

Cut for every pupil between 2015/16 and 2019/20

Schools with the least number of JAMs: £297 a year

Schools with the most number of JAMs: £447 a year

Secondary pupils

Cut for every pupil between 2015/16 and 2019/20

Schools with the least JAMs: £489 a year

Schools with the most JAMs: £658 a year

JAMs are calculated by NUT/ATL in the following manner: Our metric for JAMs at a school is the number of pupils who are currently not receiving free school meals but have done at some point in the last six years. We then put the schools in 10 groups based on the percentage of JAMs on the school register, and found funding averages for each group.

Now this assumes that those that come off the free school meals register move into work at the JAM level. But if they found work six years ago they might now be earning more. However, the analysis does seem to reflect that some schools are worse off than others.

As I mentioned in an earlier post, cutbacks of this magnitude are likely to affect staffing levels in schools. Whether schools will concentrate on keeping teachers and reviewing staffing levels for non-teaching staff will be a factor TeachVac will be monitoring during 2017. The number of entry level leadership posts may also come under scrutiny if schools are trying to save money. Other areas of the budget likely to be affected are, repairs and maintenance and spending on professional development. MATs may well want to ask  whether a better deal is possible on professional fees and staff in schools may query whether their executive head should earn more that the local Director of Children’s services?

Finally, for schools looking for saving, TeachVac remains the free recruitment site that costs schools, teachers and trainees nothing to use; visit www.teachvac.co.uk to try it out in 201.

 

 

 

Unresolved issues

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At this time of year, it is usual to look back and consider unfinished business that will stray over into 2017. I can think of a number of different issues where I hope there will be an outcome next year.

Firstly, I look forward to the publication of the ITT training numbers. This is so we can know whether the government has further reduced the targets, even though pupil numbers are set to increase. Any reduction would be a sure sign that times will be harder for schools in the future and that fewer teachers will be expected to be employed by state-funded schools.

Of course, lower training numbers also make it easier for the government to hit their training targets, as we have seen with the 2016 ITT census. Training numbers for 2016 were reduced and also Teach First was consolidated into the targets, reducing overall requirements. As I suggested in a previous post, education funding probably doesn’t yet worry parents as much as NHS funding and the time it takes to make a GP’s appointment. Until that changes, the days of generous spending on education will probably be over.

My second issue is the lack of a report by the Education Select Committee into teacher supply. The Committee opened an Inquiry in the autumn of 2015, but has yet to produce a report. An early report in the spring of 2016 probably became unlikely when the National Audit Office published their report on teacher training. The subsequent evidence session with civil servants in front of the Public Accounts Committee still sends shivers down my spine every time I think of it. That evidence session can be read from Question 50 onwards at http://www.publications.parliament.uk/pa/cm201617/cmselect/cmpubacc/73/7310.htm#_idTextAnchor020 and viewed at http://www.parliamentlive.tv/Event/Index/541b77b2-3cfd-4ba5-bd32-b6dd02dd6f5d (7th March 2016 – use accounts as a search term on Parliament TV if the link doesn’t work).

Any report from the Education Select Committee in 2017 may well be different from one produced sooner, not least because of the changes in membership of the Committee. Many of the present membership may not have been on the Committee during the main evidence gathering period. This leads me to wonder whether there should be a finite timescale for any Inquiry by a Select Committee and how this Inquiry is placed in terms of long-running inquiries by such Committees where there hasn’t even been an interim report.

Finally, we are still awaiting the outcome of the deliberations of the Migration Advisory Committee on the status of teaching and Tier 2 visa status. The call for evidence closed in September and the Committee has now had more than three months to deliberate the evidence, much of which was in its possession well ahead of the closing date for submissions from outside bodies. As the 2017 recruitment round for September appointments starts early in 2017, agencies, schools and even possible applicants will be keen to know when they can expect a decision. In the light of improved recruitment into training in both science and mathematics and the probably tightening of school budgets, this will be a difficult call for the Committee.

Scrooge or Santa: It depends upon where you live

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My favourite line from the DfE’s consultation document on the new funding formula for schools is:

5,500 schools will benefit from the minus 3% per pupil funding floor protection.

I think that this is a line that the late, great, author George Orwell might have penned in either 1984 or Animal Farm. The real outcome of the government’s deliberations is definitely buried in the small print. An analysis of Oxfordshire primary schools shows an almost equal split between those schools likely to benefit and those that will be worse off. The division is stark between urban schools, especially those serving communities with high degrees of under-performance that will see more money, although some may be capped by the use of floor and ceiling mechanisms, and the small, usually rural schools that are almost universally losers. Of course, I welcome the extra cash for the schools that benefit.

In the secondary sector, around two thirds of Oxfordshire schools see gains, whereas the other third, again mostly the more rural schools, will see their income drop unless they can recruit more pupils to compensate for the reduced formula funding. As secondary schools are close to the bottom of the demographic cycle in many parts of the country the loss will be to some extent mitigated by opportunities to expand as pupil numbers increase. However, rural secondary schools, and popular schools already bursting at the seams won’t be able to increase pupil numbers. The same is likely to be the case for selective schools in some of the less well funded shire counties, where they are facing reductions in the examples presented by the DfE. As these schools often have little room for expansion, cuts to already poor funding levels won’t seem like a great Christmas present.

Overall, it looks as if the gains will largely be achieved by smoothing out the historical anomalies in authorities where the long-terml average has covered a wide range of different localities from those in the top decile of deprivation to those in the lowest decile. To achieve sufficient transfer of funds, there has also had to be internal transfers leading to the losses faced my many schools in the less well-funded authorities such as Oxfordshire. To some extent the use of floors will prevent the cuts affecting individual schools from being too great, but the use of ceilings may deprive some schools of the full amount indicated by the new Formula.

Of course, this isn’t a good time to be conducting this exercise. It would have been better for the Labour government to have undertaken the exercise a decade ago, when pupil numbers were in decline and funds were more generous. At that time all might have been winners and the government wouldn’t in some cases be looking like Ebenezer Scrooge..

Funding schools has always been a contentious issue, and this consultation may affect some Conservative County Council candidates next year if it looks as if a well-liked local school is losing funds and might even have to close. One can image the number of opposition candidates already looking out the ‘Save our Schools’ posters ready for the New Year.

A small tweak on the block grant might go a long way to protect many small primary schools where the expense of preserving them might be worth not having to pay the cost of providing transport to pupils required to relocate even before looking at the cost of building new school place sin the remaining hub schools in the market towns.

However, before the final step of either a local authority closing a school or a MAT throwing in the towel, there will be amalgamations and reductions in the number of head teachers, with one head probalby leading several schools in a cluster. That might work, but the NAO report earlier this week showed that it isn’t just the outcome of the funding formula that will determine the survival of lots of schools, it is also the many other cost pressures that they face. For a start, schools could be exempt from the apprenticeship Levy on the grounds that ITT costs already mean education is paying for the training of its professional workforce.

Jam: not today and probably not tomorrow for many

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Today is an important day in the history of the financing of schools; possibly the most important since the 1988 Education Reform Act heralded the introduction of Local Management of Schools.  Already, there has been the National Audit Office report on ‘Financial sustainability of schools’. https://www.nao.org.uk/report/financial-sustainability-in-schools/

This Report makes the point that, The Department [DfE] can demonstrate using benchmarking that schools should be able to make the required savings in spending on workforce and procurement without affecting educational outcomes, but cannot be assured that these savings will be achieved in practice.

This is because, as everyone knows, the DfE doesn’t actually operate schools directly, although Regional School Commissioners come much closer to doing so that at any time in the recent history of schooling in England.

TeachVac, the free to use job matching site that could significantly reduce the spending by schools on recruitment advertising and also the cost of using agencies to recruit permanent staff that is a growing feature of the marketplace, is a case in point.

Despite being developed by experts in both teacher recruitment and software design it has been shunned by the DfE and also be teacher associations, some of whom acknowledge support from paid recruitment sites on their own web sites. One association has even refused TeachVac permission to take exhibition space at their annual conference in 2017 on the grounds that’ we have sufficient recruiters exhibiting already’!

With such a playing field it is no wonder that driving down costs in schools has been so difficult. Perhaps, now is the time for a sector-wide task force to examine methods of reducing costs to schools through better procurement. In olden times there were benchmark figures for expenditure issued by bodies such as the Association of Education Committees and other similar national bodies. Indeed, such statistics help me compile my article on ‘variations on local authority provision on education’ way back in 1981 at the start of my career.

With the publication later today of the second stage consultation on a National Funding formula it is interesting to look back at the progress made over the past 35 years and to note that differences in funding between schools and authorities was a big issue even then. When the cake isn’t large enough, it is not surprising to find those that want to eat it fighting over the size of their slice.

If floor and ceilings are included in the funding formula consultation, as expected, then as the NAO Report shows, there will be pain for all. Maybe the DfE hasn’t published the ITT allocations for 2017 as they reflect an acceptance of that pain through reduced funding for employment opportunities for teachers?

What is clear that even if life is marginally easier for some schools after the Funding Formula announcement, for many it will be bad news and a real need to pull together to make savings.

 

Managing the pounds and pence

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For aficionados of government spending the past few days have brought two interesting announcements. Firstly, there is the revised arrangements for handling the accounts of academies and MATs by the DfE in England. The failure to get to grips with this information has led to some embarrassment for the DfE over the presentation of the full departmental accounts in recent years. Hopefully, this new arrangement will mean unqualified departmental accounts in the future. It may also help everyone to understand the spending patterns of this now significant part of the education landscape. The details of the new arrangements can be found at: https://www.gov.uk/government/news/academies-sector-annual-report-and-accounts

According to the government announcement:

The new report will:

  • provide a more holistic report of the academies sector by aligning reporting of financial results with educational performance
  • separate academies spending from that of the DfE and clearly show for the first time the resources academies receive and how they use them
  • make it easier for Parliament, parents and taxpayers to scrutinise and test information about academies funding and spending

At the same time, DfE expects new arrangements to speed up validation checks by up to 2 months and enable accounts production much earlier than in previous years.

To support new reporting arrangements, the Education Funding Agency (EFA) has developed a new online accounts return for 2015 to 2016. EFA will write to all academy trusts in November with information about how to submit the accounts return.

Academy trusts must submit their accounts return by 31 January 2017. 

The second announcement came with the publication of the Education and Training Statistics for the United Kingdom 2016 https://www.gov.uk/government/statistics/education-and-training-statistics-for-the-uk-2016

This statistical release is a pale shadow of its former self and is mostly interesting for the tables it contains about qualifications across the system. However, tacked on to the end are two tables about expenditure on education across the UK.

The first years of the coalition reflect the austerity agenda instituted by the Labour government following the economic upheaval of 2008. Indeed, on one reading of the numbers, total spending on education fell throughout the period 2011-12 to 2015-16. However, this may due to the way student loan accounting changed between the Labour and coalition governments as the majority of the reduction was in the tertiary sector. As a result, education spending as a percentage of GDP fell from 5.3% to 4.4% during this period.

In cash terms, spending on both primary and secondary education was higher in 2015-16 than in 2011-12, by £1.6 billion in the primary sector and £2.7 billion in the secondary sector. The latter is surprising to the extent that pupil numbers were falling, but may be explained by the raising of the learning leaving age from 16 to 18 during this period and the resulting increase in participation feeding through to increased spending. Although these increases look large in cash terms they are not in reality so, spread as they are over a number of years. Indeed, they show spending probably flat or even declining in real terms per pupil. Interestingly, that isn’t a figure included in the data and there is no breakdown across the four home nations. This is despite education being a devolved activity.

 

 

 

Now there’s a surprise

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The new Secretary of State for Education has invented an updated variation of the Jo Moore outcome. This approach, readers will recall, was about issuing bad news on a busy news day so it didn’t receive much coverage. The current variation is to issue an important announcement at the end of a parliamentary term, either because you really need to say something or because it might receive less notice than at another time.

Anyway today’s announcement is the long awaited postponement of the second stage consultation on a National Funding formula for schools. http://www.parliament.uk/business/publications/written-questions-answers-statements/written-statements/commons/?page=2

The gist of the statement in a written answer reads as follows;

I will therefore publish the government’s full response to the first stage of the schools and high needs consultations and set out my proposals for the second stage once Parliament returns in the autumn. We will run a full consultation, and make final decisions early in the new year. Given the importance of consulting widely and fully with the sector and getting implementation right, the new system will apply from 2018-19.

All this is, of course, subject to whether there is a general election in the autumn. So, for 2017-18 and I assume for September 2017 for academies, it is business as usual based on the present funding regimes up to age 16. Presumably Schools Forums around the country will have to agree the formula to be used locally at a meeting early in the autumn term.

The delay in taking the concept of a national funding formula forward is frustrating to those authorities that might see an increase, but a reprieve for areas such as London that could be losers under the new arrangements. How schools will react is difficult to tell, but I suspect that where budgets are under pressure already, despite the guarantees for pre-16 funding, schools will take a cautious line, especially while post-16 numbers are still in decline.

So, is this a new Secretary of State acting responsibly or admitting defeat because it is just too difficult a challenge in the present economic climate where there won’t be enough money to buy off potential losers? Who knows, we’ll just have to wait and see what happens in the autumn.

By 2018-19 the growth in the school population will mean that for there to be any winners the Treasury is going to have to find more money for education. The Treasury is also going to have to accept that universities are already factoring in increases in student fees to £9,250 for 2017 and one step the DfE might take is to review why universities are charging the same amount for classroom-based subjects as for science and technology subjects. Anything they learn from that investigation might helpfully be considered in the light of the needs of UTCs that are funded at the same rate as other schools despite higher revenue expenditure, as I have pointed out before in this blog.

So should we thank the Secretary of State for putting everyone out of their misery for another year or attack her lack of willingness to move a challenging issue forward? Tough call, but not for under-funded schools in areas such as Oxfordshire.

What is a CEO worth?

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Are salaries paid to the heads of some multi-academy trusts too high, as Sir Michael Wilshaw might seem to think  from the tone of his letter to the Secretary of State or perhaps actually too low for the level of responsibility that they have to undertake. What is clear is that executive heads and chief executives of MATS do seem to think they deserve to earn more than those they manage. This seems like a sound business principle, but is it really?

There is another principle that relates pay to the nature of the work. Is taking the strategic lead in an organisation more important than running an operating unit such as a school? This is a moot point. Perhaps, the justification is that you need good talent and such individuals won’t be prepared to step up from headship without a pay rise. I would have some sympathy if the job had been offered at a lower salary first, but all too often it isn’t: in some cases it isn’t even put out to open competition just decided internally within the MAT. Can that ever be the right thing to do with public money?

With head teachers often subject to dismissal if a school fails an Ofsted inspection, does the same happen to executive heads and CEOs of MATs? If not, why not? We shall no doubt see what happens in response to this Ofsted Report.

Now the alternative view is that in London, at least, middle managers in businesses not much larger than the average primary school in staffing terms can earn six figure salaries and their CEOs even higher amounts and both groups can have bonus payments and share options on top that will pay out handsomely if the company does well. Should schools be competing with these salary levels?

I note that in response to Sir Michaels’ letter to the Secretary of State he pulls no punches. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/506718/HMCI__advice__note_MAT_inspections____10_March_2016.pdf The letter to Mrs Morgan says:

“This poor use of public money is compounded by some trusts holding very large cash reserves that are not being spent on raising standards.

“For example, at the end of August 2015, these seven trusts had total cash in the bank of £111m.

“Furthermore, some of these trusts are spending money on expensive consultants or advisers to compensate for deficits in leadership. Put together, these seven trusts spent at least £8.5m on education consultancy in 2014-15 alone.”

Now, this blog has complained in the past about schools holding large cash reserves that should be spent on teaching and learning. One might also ask, what the Regional School Commissioners have been doing in holding academies to account.

Finally, there are currently 151 local authorities in England with a Director responsible for education. In most cases they have other responsibilities as well. If each were paid £200,000 – more than they actually are – the bill would be just over £30 million before overheads. If 18,000 schools were formed into MATs of 20 schools that would be 900 CEOs. If they were paid only £100,000 each the bill would be £90 million. You can do the maths if there are more MATs and higher salaries.

Personally, I thought we were in an age of austerity and I set up TeachVac to offer a low cost option for recruitment to allow more money to be spent on teaching and learning. Frankly, this Report is disappointing news and I hope that there is an urgent review of salaries in education outside of those set by the STRB for teachers and school leaders. We need some clarity of purpose in the use of public funds.