In the face of major uncertainties, such as soaring pay inflation and the impact of economic sanctions on energy contracts, Husham Khan discusses why school leaders must engage in long-term forecasting to tackle budget challenges head-on
We are in a period of significant uncertainty, which was always expected, but I think we are a couple of years away until things start to settle down. By far the biggest impact on school budgets is pay inflation plus on costs; whilst the independent sector has felt the full brunt of increases over the last three years, such as employer contributions to teachers’ pensions and the new health and social care levy, the public sector has had some insulation from these increases. These have been factors within the DfE’s control; it can decide how it limits the impact on school budgets through offsets in funding.
As we approach the new calendar year long term forecasting has never been so important, not only from a business perspective but also in how it drives pedagogy and wellbeing. Currently, the three big uncertainties are energy, other supplies and recruitment; unfortunately, the markets for all of these areas are extremely volatile at the moment, with energy contracts procured by some councils across the UK spiking by over 200% – and that’s before you factor in the potential further impact of economic sanctions.
If the domestic market is anything to go by, we could see schools paying up to five times more than their previous standard tariff rate, excluding fixed term. Those currently on fixed term energy contracts could easily see nasty shocks to budgets in a couple of years, or when those contracts expire. My advice would be to lock in early once those fixed rate deals become available. There could be a silver lining in all of this, however, as it may accelerate the sustainability agenda and increase the number of organisations aiming for carbon neutrality. Only time will tell.
Catering for cuts
Another area which may see a potential shock is catering contracts. With inflation of pay, increasing cost of food and the rocketing price of energy, we have a perfect storm!
Whilst the impact can be mitigated (to a degree) by school meal income there will need to be a re-balancing in catering contracts to ensure affordability by the school, deliverability to the pupils and affordability from parents. Free school meal funding will, sadly, not keep up with the inflationary pressures in the short term.
I have never seen a time where recruitment has been such a challenge, with the candidate pool so depleted. This is leading to greater unit supply costs, and I am sure the re-introduction of golden hellos in order to attract staff will become more and more common. It’s a good thing for those seeking employment – but not so positive if your budget is being stretched more than you had planned. For this reason, any supply staff vacancies should include an uplift which has been agreed with your supply agency.
Just as big a threat is the overall reduction in pupil numbers within the early years and primary sectors over the next five years. We could be seeing a significant decrease in numbers in this area due to the decline in birth rates.
It is a challenge the sector will rise to again as this is who we are, and what we do!
This article was written by Husham Khan.
You can read the originally published version of this article in the Education Executive magazine.
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