Dead money?

The DfE has published some research into the funds held by Trusts for the year 2020/21. As academies and Trusts report their finances on an academic year basis, these statistics cover the period from September 2020 to August 2021.  Academy trust revenue reserves 2020 to 2021 – GOV.UK (www.gov.uk)

The main findings are summed up in the following two paragraphs from Page 4 of this short report.

Trusts average reserves – In 2020/21 average revenue reserves across academy trusts were £1.48 million, compared to £1.15 million in 2019/20, an increase of 29%. In 2020/21 the average surplus balance was £1.53 million, compared to £1.22 million in 2019/20, an increase of 26%. The average deficit balance in 2020/21 was at £318,000, compared to £376,000 in 2019/20, a decrease of 15.5%

Reserves across the sector – The 2020/21 data shows the total cumulative surplus of trusts with positive reserves was £3.96 billion. Trusts in a cumulative deficit had a total deficit of £22.24 million. In 2019/20 the total cumulative surplus was £3.17 billion against a total cumulative deficit of £42.1 million.

So nearly 4 billion pounds was tied up in reserves sitting in academy trusts waiting to be spent by August 2021. What’s more the pandemic has resulted in more cash in reserves in the average academy trust than in the previous year. Indeed, the average increase is a whopping by 29% in one year.

So, a sector that sometimes loudly complains it is short of cash managed to put quite a bit away in reserves for a rainy day. One wonders what sort of rainy day that would be? One where teachers earn a minimum of £30,000 and where soaring utility costs must be financed from reserves not in-year revenue? Perhaps educating children at home is more cost effective for schools than having them on-site.

Where were the savings made? This ad-hoc set of statistics doesn’t allow for an answer to that question. But, presumably, supply cover and less wear and tear on school premises, plus a slowdown in construction of new build and refurbishment costs anticipated to be spent during the year but for the pandemic, may have accounted for a large amount of the cash going into reserves?

There should have been some savings on recruitment costs, but, as many trusts have subscriptions with the tes and other job sites any reduction in vacancies would not necessarily result in a saving in costs compared to paying for each recruitment round individually.

As we are now half-way through the 2021-2022 academies financial year, it should be possible for the government to have sight of what has been happening since September. Will this be the year reserves start reducing in size or will the £4 billion level be reached or even exceeded?

I always maintain that revenue funding should be spent on the children in the schools at the time when it is received and not stashed away in reserves. However, some provision for depreciation of equipment and eventual replacement is prudent. Delving into these numbers in more detail should allow for consideration of whether there are economies of scale with larger trusts or the opposite. From that perspective, the data here allows for more questions than it provides answers.

1p on Income Tax for Education?

Are school underfunded? To politicians the question is probably more one of, ‘do parents perceive schools as being underfunded and will that affect how they vote?’ Despite a campaign ahead of the 2017 general election on this topic, my sense was that education wasn’t a major topic during that election. Would it be now? Has the growing campaign by some schools to ask parents for cash to fund their running costs pushed the issue up the political agenda for any post-Brexit era?

My genuine answer is that I am not sure. We have been here before. As this blog has pointed out in the past, the post-1979 period was one of financial hardship for public services that last through most of the 1980s. Indeed, I have looked back at my 1986 book on ‘Schools in London’s Commuterland’ to find that even then some schools in Surrey were asking parents for sum like £5 per term or £14 for new pupils.

Throughout the early 1990s the Liberal Democrats had a well-known policy of ‘1p on Income Tax for education’. The policy attracted voters, and was based upon a feeling that schools were under-funded. Could it be revived on the basis that the government has pledged more cash for the NHS, but not for education, and it seems likely that the present financial support from the public purse will not be sufficient to fund increases in all public services at present levels of taxation.

The alternative to public funding, schools going cap in hand to parents, lacks any real support for a social justice agenda. Parents in my Division in North Oxford, where I am the county councillor, can certainly afford to part with a small sum from their disposable income for the school their child attends. The same isn’t true for many other parts of the city, where parents live on much narrow margins between income and expenditure.

If you believe, as I do, in the philosophy that a state education system should provide a standard of education necessary to create a high level of outcomes for all pupils, encouraging parents to pay towards a school’s funds creates an unfair advantage for those with the cash to help.

The funding debate is often mentioned in relation to the issue of staffing. Ever since schools gained control of their budgets in the 1990s, head teachers and governing bodies have been free to decide how to reward teachers in a system where central direction and control has become increasingly weaker.

Few now understand that the Group Size of a school once controlled not only the head teacher’s salary, but also the number of promoted posts a school could deploy. As a result, since school control of budgets came into force, the government has only ever funded schools on the average cost of a teachers: schools with lots of young teachers often did well, but those with lots of teachers on the top of the pay spine and with TLRs had a salary bill in excess of what their funding would be each year. Should these schools be allowed to top up their funding from parents? Then there is the question of reserves. Any parent asked for cash should require the school to display their latest set of accounts so the actual financial position can be determined.  Finally, ought there to be benchmarks in terms of issues such as pupil-teacher ratios and class sizes that identify funding levels. But, there is still the issue of how to compensate for the fact that older more experienced teachers cost more than younger less experienced ones?

One solution is to even out the costs by increasing the CPD allocation to young teachers so the actual cost of a teacher to a school is the same wherever they are in their career.

School reserves shrink

The news that the annual survey of school bank balances revealed that a third of schools surveyed were in deficit should come as no surprise. This blog along with many others has been charting the decline in school funds for some time.

Coincidentally, I asked the question at Oxfordshire’s Cabinet meeting this afternoon about school balances across maintained primary schools in Oxfordshire and how they changed between the end of the 2017 and 2018 financial years.

Since I haven’t yet had the data in the form of a spreadsheet, only as a written answer, I have yet to see whether Oxfordshire schools are faring better or worse than the national average. I hope to be able to answer that question later this week. However, there are a lot of minus figures in the table, even taking the effects of double entry bookkeeping into account.

At the Cabinet meeting, I also challenged the Cabinet member – part of the Conservative administration of the County – whether or not she would support the notion that money provided for schools in Oxfordshire should not be allowed to be transferred by Multi-Academy Trusts to support schools in the Trust located elsewhere in England.

I will need to check the minutes for her answer, but I am confident that she agreed with me. Personally, I would go further and not allow MAT or MACs to transfer funds between schools within the group even in Oxfordshire unless the same arrangements were possible for maintained schools and stand-alone academies.

Regular readers of this blog will know auditors of MAT/Macs were written to earlier this year by the Minister in the DfE about the issue of allowing the virement of funds between schools within MAT/MACs. However, schools outside MAT/MACs have no such facility available to them. Whether this should be seen as an invitation to join a MAT or to avoid doing so and keep the cash for the school will be a matter for local decision-making.

However, as I made clear above, if the DfE is going to have a National Funding Formula for schools it cannot, at least in my judgement, be correct for trustees to take money from schools in one area to provide for schools in another area.

Schools Forums up and down the country should take a long look at the issue or virement of monies between schools and consider whether they can draw up local guidelines. After all, the Schools Forum has a key role to play in school finances these days.

The F40 Group of local authorities might also want to have a say if cash were being transferred from their members to poorly performing schools in better funded parts of the country. Such a move would be a case of ‘depriving the deprived’.

After ten years of austerity it is no surprise that schools are running out of reserves. When they do then real cuts start being to be made. With a 3.5% pay rise to fund, expect 2019 balances to be far worse than they were this year.