With school budgets protected over the past five years, there is now rising evidence to suggest that the tide may be turning irrespective of the next government. During the past month, research by the Institute for Fiscal Studies and a school leadership survey both point to an alarming deterioration ahead. In particular, almost half of the 1,000 respondents to the survey described the financial situation at their school as critical or very serious.
As we all know, school costs are mostly for personnel with direct, and indirect, teaching and non-teaching staff representing 75% to 80% of total school expenditure. It is therefore no surprise that the combination of public sector wage freezes, or modest increases, coupled with the introduction of the pupil premium, has left schools in relatively good shape when compared with other parts of the public sector. This is about to change. Putting aside the potentially inflationary impact of performance-related pay on staff remuneration, the introduction of higher employer contributions to the teacher pension scheme from September 2015 and higher National Insurance Contributions from April 2016 (schools will no longer be able to contract out of the state second pension) will most likely add 4% to the school budget from next year. For secondary schools, this cost headwind is exacerbated by the decline in pupil numbers caused by demographic shifts, which will only start to improve later in the decade.
How are schools positioned to meet this challenge? The most recent data from the Department for Education suggests just 7% of LA maintained schools are currently in deficit but 43% are running an abnormal surplus (defined as > 5% for secondary schools and 8% for primaries). However, this also implies that half of all schools are doing what they should do and only holding back a small surplus, namely 0-5% of their total budget each year for a ‘rainy day’. Therefore, the mechanical 4% rise due to pensions and national insurance contributions combined with a modest amount of, well deserved, pay inflation will most likely, without intervention, tip many schools into deficit. No wonder half of all heads surveyed described their school’s financial situation as very serious, or worse.
What can be done to mitigate this imminent budget crisis? Whilst cutting costs (tighter procurement, reducing external CPD) and alternative revenue generating sources (using your school’s assets for commercial ventures) can help, these measures will no longer be sufficient to meet the size of the budget shortfall. In order to achieve this, a full review of staff structures in either support, or teaching staff, or both, may well be the only course of action.
Educate’s expertise is centred around helping schools and academies get the best value for money from their resources – both human and physical. On the staffing side, the work of Nigel Middleton and Neil Clifton over the last decade had made us national leaders in the complex and contentious fields of appraisal and performance-related pay. As part of this work, we have helped many schools develop alternative and often shorter staffing and leadership structures. If you would like further information then please contact Nicky Haskins on firstname.lastname@example.org or on 020 3411 1080.