Cash not much use in the bank

School balances continued to increase as publicly funded schools across England ignored the  need to help the economy grow and added around a billion pounds sterling to their bank accounts in the 2011/12 financial year. Reserves now top the equivalent of 7% of revenue income.

Taking taxpayers hard earned pounds and putting the cash into school banks accounts seems a dumb thing to do when the economy is headed for a triple dip recession.

Here’s what I wrote when the figures appeared last year, and it still holds good.

Use school reserves to help the economy grow

Should any school be sitting on uncommitted reserves of over £1mn? Should schools be allowed to convert their income designed to be spent on present pupils into funding for capital projects to benefit future generations?  If so, over what time period should the accumulation of such funds be allowed? Should there be a claw back of Pupil Premium from schools that have revenue reserves that remain at over £1mn for more than two years, or alternatively whose reserves exceed a predefined proportion of their revenue income each year?

Ever since the arrival of ‘local management of schools’, around 20 years ago, there have been concerns about how some schools handle their money. By the end of the 2010-11 financial year some £1.95* billion of real money was located in the reserves of maintained schools, with presumably a further unidentifiable sum sitting in the bank accounts of academies.

The figure  for reserves rose by £300 million between the end of the 2009-10 financial year and March 2011, boosting the average revenue balance for maintained school from £77,000 to £91,000 in just one year. The average revenue balance for a primary school in the maintained sector was £87,000 in March 2011, whilst it was £208,000 for the average secondary school, and £132,000 for the average special school. Overall, a sum equivalent to more than 5% of revenue income was sitting in school reserves at the end of the 2010-11 financial year. The 92.4% of schools with cash reserves represented the largest percentage of schools this century with reserves.

Part of the reason for the rise in balances was the reduction in the number of schools with deficit budgets. The number fell from 1,968 in 2009-10 to 1,511 at the end of 2010-11. Of course, it may be that some of this reduction was the result of schools with deficits being closed and re-opening as academies whose data are not included and not traceable despite being pubic money. Amongst the 1,511 schools with deficit budgets in March 2011, the average amount of the deficit had increased from £82,000 in March 2010 to almost £95,000 in March 2011. Given that during the same period the average for schools with a surplus increased from almost £93,000 to over £105,000 per school, the gap between the schools at either end of Mr Micawber’s scale widened to an average figure of £200,000.

As increases in staff salaries are capped for the next few years, there ought to be no reason why schools should not start to release the cash they are holding onto as a contribution to the growth strategy the government so urgently needs to boost the general economy. Injecting even a quarter of the reserves would add £500 million to public spending without the need to justify raising it through taxation. If used to offer temporary teaching posts, it would both help to reduce unemployment and cut spending on benefits. Used to create a government funded intern scheme for new graduates it might allow 20,000 young people to enter the labour market for a year. But, how you would force schools to spend the money is another matter.

*In 2011-12 the total revenue balance across all  LA maintained schools was £2.3 billion, an increase of £0.4 billion (18.8%) over the 2010-11 revenue balance figure of £2.0 billion. This equates to an average surplus in each school of almost £111,000.. The total revenue balance of £2.3 billion is  7.1% of the  total revenue income across all  LA maintained schools. This is an increase of  1.7 percentage points compared with the 2010-11 figure of 5.4%. source

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