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Schools must face their financial reality

Why schools need to face the truth and manage their finances carefully

Posted by Charley Rogers | May 21, 2017 | Law, finance, HR

By Amanda Godfrey, Executive Head of the Spiral Partnership Trust  

School budgets are currently trapped in a painful pincer movement created by the combination of reduced income and increased costs. Funding changes, particularly the reduction of the ESG (Education Services Grant) has dramatically reduced income for both maintained and academy schools.  

Over the last four years alone this has reduced from £120 per child to absolutely nothing. At the same time, new and increased costs such as increased employer pension contributions, the introduction of the apprenticeship levy and the raising of minimum wage have added thousands to the expenditure column of the school budget.  

The impact is a difference in tens of thousands of pounds, unfortunately not the sort of figures that can be mitigated by a better deal on buying pencils or turning the heating off an hour earlier.

The impact of reducing costs further

Staffing accounts for around 80% of a primary school budget, often more in smaller schools. The extent to which savings can be made within the staff budget is limited. Schools have already made successive savings over several years, which limits the capacity to save even more; inevitably savings will have to me made from staff costs.

The legal limits on class sizes for the youngest children does limit what heads can do but there are a limited range of choices:

• Larger class sizes for older children (KS2 and above)

• Mixed age classes where pupil numbers are small or uneven

• Fewer experienced teachers

• Fewer class-based support staff

• Smaller admin & premises support staff teams

The impact is less capacity to meet the needs of individuals and the community, and less support for individual pupils with specific needs. In the short term, schools can manage this and limit the impact, but in the longer term this will reduce schools’ capacity for inclusion and supporting pupils with complex medical or learning needs.  

Heads will need to be sure that every penny spent is making a difference to children’s learning. Heads will need financial training to support them in this, and specialist training will help them to focus on hidden costs and alternatives. 

Ultimately schools will have to reduce the extent of their reach, reducing the extent of their provision to their core duties and key priorities. Additional activities, before and after school, will inevitably be vulnerable to cuts too.

Leading schools with less money

Heads have had at least two years to prepare for this, and as such they should have been looking ahead and planning to reduce their budgets over this period; assessing value, reducing staff when natural opportunities arose, and planning different ways of working.  But for lots of reasons many schools will have missed these opportunities - not looking ahead or recognising the need or a lack of long-term leadership vision and unplanned changes.

The last ten years have been relatively comfortable for schools, as they have had enough capacity to have choices and invest in improvements, but heads will now need to take a different approach and be willing to question the value achieved from all expenditure, and willing to make difficult decisions when they can’t be confident that the value achieved is making a difference to pupils.  

Heads will need to be sure that every penny spent is making a difference to children’s learning. Heads will need financial training to support them in this, and specialist training will help them to focus on hidden costs and alternatives. 

Heads will also need to get better at understanding hidden costs – for example photocopier contracts can conceal additional on-going costs, so comparing copy costs is only part of the story. Handling cash is another expensive activity with hidden costs that schools will need to consider. Heads will need to be better at understanding these issues and at employing skilled admin staff to embed this approach in every aspect of the school’s organisation.  

Running schools like a business

Ensuring everyone on the school team understands the difference between ‘cost’ and ‘value’ is key. Schools need to be considering and costing different approaches going forward. Heads need to develop their business acumen, to ensure that they are running their schools as efficient and effective businesses.   

Facing the financial reality

Tough decisions are never easy but the long-term consequences of avoiding difficult decisions are usually worse. The consequence of not making a difficult decision now and reducing staff costs could be an ongoing deficit, and ultimately risks the viability of the school. These decisions have to be faced, and heads have to have the courage of their convictions.   

Protecting the staff budget at all costs is tempting, but long term this leads to a lack of investment in maintenance and can start to erode the quality of the school. Ultimately schools have to face their own financial reality and live within their means.

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