NEWS: Schools struggle with deficits

As reported by The Guardian, almost half of multi-academy trusts faced financial deficits last year, with rising energy bills and staff costs cited as primary culprits, prompting concerns about long-term financial sustainability in the education sector

The benchmark report by the accountancy network Kreston UK, based on studying the accounts of 279 trusts representing more than 2,300 schools, found that 47% were running in-year deficits – spending more than their allocated revenue for the financial year ending in 2023.

“Trusts don’t know what additional income streams they will receive from one year to the next,” said Kevin Connor, head of academies at Bishop Fleming – one of the accountancy firms in the Kreston network. “Will they receive more money to cover energy costs? How much will be offered to cover pay review and pension contributions?”

The accountants found that many more schools would have been in deficit but for ad hoc grants averaging £60k for primaries and £200k for secondaries, as well as £447m in “energy efficiency” grants awarded by the Department for Education last year.

Connor added that trusts had been “extremely effective” at controlling costs but that did not alleviate a sense of uncertainty in the sector.

Benedicte Yue Vincent, the chief financial officer of the River Learning Trust, said: “Most trusts in the sector have done everything that the government has suggested to control costs – reviewing class sizes and curriculum to optimise staffing ratios, procurement and other areas that allow us to improve efficiencies. But the simple fact is that costs are increasing faster than funding and schools are constantly asked to do more with less.”

The news comes after the Department for Education admitted in October to bungling its funding figures for state schools in England, revealing a £370m error in previous announcements by ministers. The mistake means that mainstream primary and secondary schools will be given at least £50 less for each pupil than originally forecast, forcing school leaders to redraw their budgets for 2024-25.

Trusts say there are several costs that continue to place pressure on their finances. Energy costs are still high, the teacher recruitment and retention crisis has led to the use of costly agency staff, and the cost of food has increased, which affects the price of school catering contracts.

Leora Cruddas, the chief executive of the Confederation of School Trusts, said: “CST wants to see a fair per-pupil settlement that is sufficient, sustainable and equitable and includes weighting for disadvantage. We need a longer notice period for funding decisions to enable good strategic planning. Teachers deserve to be paid, but the last announcement of the teacher pay award came after all budgets had been set for trusts and schools.

“The quantum of funding for capital projects is not enough. We need a proper strategy for our schools, so they are safe places to learn for young people. It is essential that the next government addresses this.”