Changes in Academy Funding
With a general election around the corner, the main political parties have already identified the funding of education as a major issue. David Cameron has conceded that per pupil funding will not go up in real terms, leaving schools with significant uncertainty about what will be happening in the future.
There have already been some changes announced which will impact on future funding levels. We have had confirmation that the Education Services Grant will reduced from £113 per pupil to £87 per pupil next year and that SEN LACSEG funding is being removed.
In addition to these funding cuts, Teachers’ Pension Scheme contributions will increase from 14.1% to 16.4% from September 2015 and National Insurance contributions will increase by 3.4% as the rebate is removed from April 2016. These changes will have a significant impact on staff costs in schools.
In the face of these changes, all of which are reducing resources available to schools, Governors and Senior Leadership teams will need to come up with a strategy to deal with them.
As a starting point, the Academy should evaluate the impact on income and staff costs that these changes are likely to have. It is also not sufficient to do this for only the next twelve months, and whilst funding and pupil numbers are not yet known for subsequent periods, an estimate should be used to give an idea of the likely impact. These calculations can then be incorporated into the preparation of budgets for a minimum of three years. Once the impact is known there will be a number of options available.
- It may be possible to reduce costs in other areas in order to compensate for reduced income and higher staff costs. Each area of the budget should be reviewed to ensure it is providing value for money.
- Staff cost increases may be offset by the use of teachers on a lower salary banding to replace retiring teachers.
- Depending on the level of reserves held by the school, the Governors may decide to utilise part of their reserves to offset the impact. This will need to be reviewed in conjunction with the reserves policy of the school. This will ensure that reserves are not reduced to a level which puts the school at risk.
- As a last resort, it may be necessary to consider redundancies although this in itself is likely to incur a cost in the short term.
Once a strategy has been established, it will be important for the school to have up-to-date accurate financial management information to identify any issues arising at an early stage. Actual information can be reviewed when orders are received to establish if the cost centre or budget area is within budget and decisions on any overspends taken as required.
With so much uncertainty, it is important for the Senior Management Team and the Governors to understand how the school will be affected and be able to make decisions and adapt as early as possible.
A bit of good news is that there has been a recent announcement from the Department of Education that there will be a £6 billion investment to improve the condition of schools, £2 billion under the second phase of the Priority School Building Programme and £4 billion under School condition funding.
As for the impact of the election, we will have to wait and see.