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Tilden Watson: "With significant changes on the horizon, those across the sector will want to ensure that they continue to maintain a healthy balance sheet"

What financial risks lie ahead for the academies sector?

Tilden Watson looks at the future for academies as schools need to do more with less funding

Posted by Stephanie Broad | August 18, 2015 | People, policy, politics

The architects of the academy programme believed that a new wave of freedoms for the nation’s schools would drive up standards in areas beyond academic attainment. Financial powers over areas such as staff pay and special needs support were an opportunity for head teachers to tailor their provision for both students and staff. 

More autonomy appears to have paid dividends: the latest figures for 2013/2014 show that academies held an average of £632,000 in reserve, a decent safety net in case problems are encountered. While the Chancellor has promised he will protect the schools budget in the upcoming spending review, the wider picture isn’t quite as rosy. Against a backdrop of rising pressure on resources, funding has only increased by a modest 0.1% since 2010. 

The result is that schools will have to start doing more with less, while looking to fall back on the funds they’ve accrued. The wider story is one of considerable change over the next five years with a number of important developments on the horizon. There is a whole range of potential risks in tackling these, looking specifically at schools’ finances four issues stand out in particular.

As Regional Schools Commissioners (RSCs) get down to business, how robust will their oversight of academies’ finances be? 

The panel of eight were appointed only last year, with a broad remit to monitor performance and take action when standards aren’t being met. This role will involve a considerable amount of joint working, but the relationship between RSCs, local authorities and Whitehall has not yet been fully tested in practice.

The Government’s Education and Adoption Bill, currently making its way through Parliament, could act to speed up the creation of new academies. 

Progress in this area has already been fast, the number increased from 203 in 2010 to 4,580 in 2015. Clause one of the new Bill allows the Secretary of State to convert “coasting” maintained schools, a definition which will be set by ministers at a later date. During this process newcomers will want to review and improve existing financial protocols to ensure they are able to effectively manage the greater financial responsibility and mitigate any risks arising from the transition to financial autonomy.

The DfE will want to ensure that that it gets its central funding regime under control after the Comptroller and Auditor General severely criticised their 2013/2014 accounts.

The methodology used to include trusts in the Department’s books was considered “not true and fair”. Conversations with the Treasury on how to resolve the situation are on-going. The risk is that the reporting demands on academies change as a result of this dialogue, they’ll want to ensure they have the resources in place to adapt to possible change. 

As the Department for Education (DfE) proceeds with more academy conversions, will it be able to fund places for the extra half a million secondary pupils expected between 2016 and 2023?

Only small budgetary increases are likely over the next few years, while the Chancellor has actively sought to cut wider spend from the non-schools fund in areas such as departmental administration. The challenge is to utilise existing freedoms to build up a sound financial profile, which will enable further expansion and greater cross industry working down the line. 

With significant changes on the horizon, those across the sector will want to ensure that they continue to maintain a healthy balance sheet. This overarching goal is aided by the direct funding agreement with the Secretary of State, one of the central tenants of the original academy programme. 

The freedom this has brought has been utilised in many areas, allowing education leaders to make important choices that shape a school’s future. A 2014 survey from the DfE found that 87% of academies have procured services that were previously provided by the local authority. Competition in the sector should be protected as it helps to drive up standards across the board. Schools that have converted illustrate this best: over 30% achieved outstanding status in 2014, compared to a figure below 20% for those still under local authority control. 

Tilden Watson is Head of Education, Zurich Municipal    

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