Cost pressures for schools and new Funding Formula

In the last few days of the Autumn term two key announcements were made on school funding.

The first was a report from the National Audit Office (NAO) on how prepared schools and academies were in responding to the cost pressures over the next 3/5 years. A few days later this was followed by the second stage of consultation on the National Funding Formula (NFF). In our blog we cover both these issues, but we would encourage all school business managers, members of SLT, directors and governors to read the published documents on both issues. The minister is encouraging you to be involved – and we would urge you to do so. The consultation is open until 22 March 2017. As always, if there are matters that School Business Services can assist you with – whether it’s helping to explain the changes, providing financial planning, or a fundamental review of your processes – then do get in touch with us.

The Financial Sustainability of Schools

The National Audit Office (NAO) has delivered a scathing verdict on the Department for Education’s lack of leadership on school finances as deficits continue to grow across all types of school.

The key findings of the report are:

1. The Department’s overall schools budget is protected in real terms but does not provide for funding per pupil to increase in line with inflation.
2. The Department estimates that mainstream schools will have to find savings of £3.0 billion to counteract cumulative cost pressures.
3. The Department’s savings estimates do not take account of the cost implications for schools of its policy changes.
4. The Department 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.
5. The Department has not clearly communicated to schools the scale and pace of the savings that will be needed.
6. Overall, the financial position of primary schools has been relatively stable, however, there are signs of financial challenges in secondary schools.
7. In recent years schools have spent a smaller proportion of their budgets on teaching staff.
8. The Department continues to develop and publish advice and guidance to help schools improve their financial management and achieve efficiency savings, but has not yet completed work to help schools secure crucial procurement and workforce savings.
9. The Department’s support should be particularly useful for those schools where financial management is weakest, but it cannot be sure that those schools most in need of support will use it.

It has been estimated that between now and 2020 schools will face additional cost pressures of 8% - many of which are the result of changes the government has or will put in motion.

Typically this can be broken down as:

1. 1.8% increases from National Insurance
2. 0.4% increases in Teachers Pension
3. 4.4% annual pay awards
4. 0.4% apprenticeship levy
5. 1.3% inflationary pressures on non-staff spending (likely to increase if predictions about inflation post-Brexit are realised)

It is also estimated that 60% of all secondary schools are now spending more than they receive in income, using reserves where these are established, but causing serious issues for new schools, such as flagship ‘free schools’, that have not had time to build up such reserves. Primary schools appear to be in better shape with fewer overspending at present. One of the recommendations made by NAO is that the DfE should provide clear leadership to support schools and to ensure that all parties are open about the opportunities to make efficiency savings, are realistic about timetables and the implications of cost savings, and understand each other’s concerns. Download report → For further commentary from Schools Week, click here.

National Funding Formula

The long awaited second stage consultation on a National Funding Formula was announced shortly before Christmas. In announcing the changes Justine Green said: ‘No matter where they live, whatever their background, ability or need, children should have access to an excellent education that unlocks talent and creates opportunity. We want all children to reach their full potential and to succeed in adult life. The current funding system does not support this aspiration.’ The executive summary outlines the DfE's proposals and the effect on schools, and the consultation document explains these in detail. The effect on each school and area is shown in full in the impact tables provided by the DfE. It is suggested that one third of schools will see their funding reduced. A number of professional bodies are currently examining these documents in detail before coming to any conclusion on whether the government has been successful in ensuring that similar schools are funded at the same level across the country. We will monitor what various bodies are saying, and publish links to their findings in future blogs.

Please remember the consultation is open until 22 March 2017.

Please click here to access all the consultation document