New research reveals height of school funding pressures

The Education Policy Institute (EPI) has released new research examining the latest trends in local authority maintained school budgets and assessing whether all schools will be able to meet cost pressures over the next two years, following recent government funding reforms

School funding pressures in England asseses the state of local authority (LA) maintained school budget balances – which currently stands at 1,136 secondaries, 13,404 primaries – over the past seven years and the findings indicate that a number of schools, which have previously been struggling financially have now fallen into deficit.
The research published March 16 builds on previous research by EPI on the impact of the government’s national funding formula for schools and the changes that have been seen in terms of real term per pupil spending.

Schools’ financial deficits: the key findings

The research found that the number of LA maintained secondary schools in deficit reduced from 14.3% in 2010-11 to 8.8% in 2013-14. However, over the last four years – up until 2016-17 – the percentage of LA secondaries in deficit nearly trebled, reaching 21.6%. The average deficit rose over this seven-year period from £292,822 in 2010-11 to £374,990 in 2016-17.
Priamaries too have seen an increase in deficits; in 2010-11 5,2% were in deficit and while this decreased to 3.7% the following year, before levelling off at around four per cent until 2015-16, the proportion of LA maintained primaries in deficit increased significantly – to 7.1% in 2016-17. According to the analysis average deficit also noticeably increased, from £72,042 in 2010-11 to £107,962 in 2016-17.

Expenditure exceeding income

Over two-thirds of LA maintained secondaries spent more than their income in 2016-17, the report found and highlighted that in such cases this wasn’t an isolated event – in fact 40% of LA maintained secondary schools have balances in decline for at least two years in a row.
Primaries are shown to be experiencing a similar decline. In 2016-17 over 60% were spending more than their income and for a quarter this had been the case for two consecutive years or more.

Considering financial pressures

The EPI analysis took an in-depth look at the impact the annual one percent pay settlement for school staff is having on all state-funded mainstream schools – including local authority maintained, academies, free schools, UTCs, studio schools and CTCs – and found that funding allocated through the national funding formula (NFF) fails to meet pressures on school budgets from this cost alone; this is despite the £1.3bn the government promised for schools in July 2017.
It also found that as many as 40% – around 7,500 schools – are unlikely to receive enough funding in 2018-19 to meet these pay pressures alone and that this figure is likely to rise to nearly half – 9,000 – state-funded mainstream schools in England in 2019-20.
‘Schools are facing a variety of cost pressures, yet this analysis shows how many schools are struggling just from this staffing cost alone. In addition, our assumption of one per cent staff pay increase over the next two years is cautious – with the government having signalled that future rises in teachers’ pay may be higher than the current one per cent cap over the next few years,’ the EPI says.
Based on the analysis, the EPI says that s significant proportion of schools will unlikely be able to meet the cost of annual staff pay increases even with a combination of government funding and their own reserves – even in the short-term. The paper recognises that schools have undertaken various efficiency measures to deliver cost savings – such as switching suppliers, reducing energy usage and reducing the size of leadership – however, staffing costs account for the majority of spending by schools and it is unlikely that schools will make the necessary level of savings without also cutting back on staff.
‘Many schools will face the challenge of containing budget pressures and reducing staffing numbers without impacting on education standards,’ the EPI paper says.
Commenting on the report, Geoff Barton, general secretary of the Association of School and College Leaders, said: “This report shows that many schools are so cash-strapped they are unable to afford even a meagre pay rise of one per cent for their staff next year without having to make further cuts. The government has failed to provide schools with funding for pay awards over the course of several years, and this is one of a series of additional cost pressures which have pushed school finances to breaking point. Staffing cuts are not just likely in the future, as the EPI report suggests, but have already taken place in many schools.
“If the government values education it must put its money where its mouth is and provide schools with the funding they need to give all of our young people the very best start in life, and it must fully fund decent pay awards for school staff after years of austerity.”
Dr Mary Bousted, joint general secretary of the National Education Union (NEU), said: “This new report from the Education Policy Institute confirms what the NEU has been saying about the impact of the government’s real terms cuts to education funding.
“With most schools overspending their income, it is clear that schools’ needs are not being met by the government. This includes the need to invest in teachers and support staff.  As recent research by the School Cuts coalition of unions has shown, class sizes have been increasing as a result of government underfunding. Increases in class size mean less individual attention for children, but they also increase the workload for teachers and support staff – driving more people away from teaching and intensifying the recruitment and retention crisis that has developed. A high-quality education service cannot be delivered without investing in teachers and support staff. The government must restore the value of school staff pay to 2010 pre-austerity levels, starting with an immediate and fully-funded fiver per cent pay increase for teachers to address the growing teacher recruitment and retention crisis.
“Instead of ignoring the evidence, the government must respond to the concerns of parents and those working to deliver the high-quality education service we need.”
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