1p on Income Tax for Education?

Are school underfunded? To politicians the question is probably more one of, ‘do parents perceive schools as being underfunded and will that affect how they vote?’ Despite a campaign ahead of the 2017 general election on this topic, my sense was that education wasn’t a major topic during that election. Would it be now? Has the growing campaign by some schools to ask parents for cash to fund their running costs pushed the issue up the political agenda for any post-Brexit era?

My genuine answer is that I am not sure. We have been here before. As this blog has pointed out in the past, the post-1979 period was one of financial hardship for public services that last through most of the 1980s. Indeed, I have looked back at my 1986 book on ‘Schools in London’s Commuterland’ to find that even then some schools in Surrey were asking parents for sum like £5 per term or £14 for new pupils.

Throughout the early 1990s the Liberal Democrats had a well-known policy of ‘1p on Income Tax for education’. The policy attracted voters, and was based upon a feeling that schools were under-funded. Could it be revived on the basis that the government has pledged more cash for the NHS, but not for education, and it seems likely that the present financial support from the public purse will not be sufficient to fund increases in all public services at present levels of taxation.

The alternative to public funding, schools going cap in hand to parents, lacks any real support for a social justice agenda. Parents in my Division in North Oxford, where I am the county councillor, can certainly afford to part with a small sum from their disposable income for the school their child attends. The same isn’t true for many other parts of the city, where parents live on much narrow margins between income and expenditure.

If you believe, as I do, in the philosophy that a state education system should provide a standard of education necessary to create a high level of outcomes for all pupils, encouraging parents to pay towards a school’s funds creates an unfair advantage for those with the cash to help.

The funding debate is often mentioned in relation to the issue of staffing. Ever since schools gained control of their budgets in the 1990s, head teachers and governing bodies have been free to decide how to reward teachers in a system where central direction and control has become increasingly weaker.

Few now understand that the Group Size of a school once controlled not only the head teacher’s salary, but also the number of promoted posts a school could deploy. As a result, since school control of budgets came into force, the government has only ever funded schools on the average cost of a teachers: schools with lots of young teachers often did well, but those with lots of teachers on the top of the pay spine and with TLRs had a salary bill in excess of what their funding would be each year. Should these schools be allowed to top up their funding from parents? Then there is the question of reserves. Any parent asked for cash should require the school to display their latest set of accounts so the actual financial position can be determined.  Finally, ought there to be benchmarks in terms of issues such as pupil-teacher ratios and class sizes that identify funding levels. But, there is still the issue of how to compensate for the fact that older more experienced teachers cost more than younger less experienced ones?

One solution is to even out the costs by increasing the CPD allocation to young teachers so the actual cost of a teacher to a school is the same wherever they are in their career.

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Lollipops and Déjà vu

Yesterday’s budget handout of £400 million to schools reminded me of Gordon Brown’s budget of 2000 after he had stopped following the Tory plans for the economy set out under John Major’s government. Those with long memories will recall both the 1997 decision by Blair and Brown to continue with government spending restraint and the spending spree after the Labour government changed direction.

One of Gordon Brown’s rabbits was to announce from the dispatch box in his 1999 and 2000 budgets extra funding for schools. This was great news for the schools, but less so for the orderly planning of teacher supply. As now, the extra cash came at a point in time when recruiting new entrants into teaching was proving quite a challenge: the cash make the situation far worse as schools went out seeking to hire teachers that just weren’t there. Eventually, the Education Department stopped the rot by upping the salaries of existing teachers in a way that prevented unchecked growth in teacher numbers. The result was a period where teachers were relatively better paid than for a generation. The end only came with the 2008 recession and the freeze on public sector pay.

So, yesterday felt like a sense of Déjà vu, with a Chancellor pulling a rabbit out of his budget red box and handing an average of £10,000 to each primary school and £50,000 to each secondary school: so much for a National Funding Formula. Of course, these numbers aren’t anywhere near the amount Gordon Brown had on offer in real terms in his 2000 budget when he announced that:

To support these reforms in our secondary schools he will now make a payment to every head teacher for books, equipment and staffing.

 Last year he was able to make an extra payment for books and equipment of 2,000 pounds.

 This April every one of these 3,500 secondary schools will receive a minimum payment of 30,000 pounds and the largest schools will receive 50,000 pounds.

 A total of 300 million in new investment through these measures alone, money paid direct to the school and to the head teacher for use in the classroom.   http://www.ukpol.co.uk/gordon-brown-2000-budget-speech/

but if used to recruit extra teachers, the new cash announced yesterday could seriously affect the plans announced only last week by the DfE for the ITT allocations in 2019/20. After 2000, schools went shopping for teachers. Perhaps, this time the cash will be used to pay for the unfunded Leadership pay increases, rather than extra teachers. But, it could distort the distribution of teachers in real shortage subjects, such as teachers of Physics, if some schools decided to offer recruitment and retention allowances to attract such teachers. However, the confusion over the use of the word ‘capital’ alongside ‘little extra’ is budgets where schools can spend money mostly as they see fit and the timescale for the cash arriving in school’s budgets will make understanding of how the cash is spent challenging, even should the DfE really want to know.

The £10,000 will certainly make a difference for many small primary schools, especially those losing pupils as the birth rate has slowed down. For some it may make the difference between possible closure and staying open that bit longer.

There must be a question about the purpose of a National Funding Formula if a Chancellor can override it on the one hand and an academy trust can ignore it on the other hand. As ever, it seems like back to the future.

 

School reserves shrink

The news that the annual survey of school bank balances revealed that a third of schools surveyed were in deficit should come as no surprise. This blog along with many others has been charting the decline in school funds for some time.

Coincidentally, I asked the question at Oxfordshire’s Cabinet meeting this afternoon about school balances across maintained primary schools in Oxfordshire and how they changed between the end of the 2017 and 2018 financial years.

Since I haven’t yet had the data in the form of a spreadsheet, only as a written answer, I have yet to see whether Oxfordshire schools are faring better or worse than the national average. I hope to be able to answer that question later this week. However, there are a lot of minus figures in the table, even taking the effects of double entry bookkeeping into account.

At the Cabinet meeting, I also challenged the Cabinet member – part of the Conservative administration of the County – whether or not she would support the notion that money provided for schools in Oxfordshire should not be allowed to be transferred by Multi-Academy Trusts to support schools in the Trust located elsewhere in England.

I will need to check the minutes for her answer, but I am confident that she agreed with me. Personally, I would go further and not allow MAT or MACs to transfer funds between schools within the group even in Oxfordshire unless the same arrangements were possible for maintained schools and stand-alone academies.

Regular readers of this blog will know auditors of MAT/Macs were written to earlier this year by the Minister in the DfE about the issue of allowing the virement of funds between schools within MAT/MACs. However, schools outside MAT/MACs have no such facility available to them. Whether this should be seen as an invitation to join a MAT or to avoid doing so and keep the cash for the school will be a matter for local decision-making.

However, as I made clear above, if the DfE is going to have a National Funding Formula for schools it cannot, at least in my judgement, be correct for trustees to take money from schools in one area to provide for schools in another area.

Schools Forums up and down the country should take a long look at the issue or virement of monies between schools and consider whether they can draw up local guidelines. After all, the Schools Forum has a key role to play in school finances these days.

The F40 Group of local authorities might also want to have a say if cash were being transferred from their members to poorly performing schools in better funded parts of the country. Such a move would be a case of ‘depriving the deprived’.

After ten years of austerity it is no surprise that schools are running out of reserves. When they do then real cuts start being to be made. With a 3.5% pay rise to fund, expect 2019 balances to be far worse than they were this year.

 

 

Pressure on academy budgets in 2015-2016

The DfE has now published the financial data on single academy schools for the year 2015-2016, covering the period to the end of August 2016, almost two years ago now. https://www.gov.uk/government/statistics/income-and-expenditure-in-academies-in-england-2015-to-2016

What is striking is the similarity with the trends in non-academy school finances for 2016-17 highlighted in my post of the 14th December 2017.

In today’s tables, about this select group of academies, all groups of schools spent more than their income in 2015-2016. For the primary academies, this is the first year where median expenditure exceeded income. In the secondary sector, it is the third year running median expenditure has exceeded median income.

In the year ending August 2016, the total revenue expenditure in this group of academies exceeded income by £280m. This represents 1.5% of income, up from 1.0% in 2014 to 2015. However, as the DfE notes, this does not mean that these academies are inevitably in debt, as they may have had reserve funds from which these costs were able to be met. Nevertheless, it is not a trend that can continue for ever as reserves are eventually exhausted.

There is a strong probability that the gap has widened since then as the funding crisis in schools has intensified. If the next pay rise isn’t fully funded, then some schools may well be in real financial difficulties.

As might be expected when budgets come under pressure, these academies spent a great proportion of their income on teaching staff than in the previous year. Although expenditure on teaching staff as a proportion of total expenditure has fallen by 3.2 percentage points since 2011/12 when the data were first collected. However, it rose by 1.2 percentage points in 2015/16 over the previous year.

Supply staff cost these schools 2.3% of their budgets in 2015-16, so even the recent government announcement about driving down the costs of some supply agency activities, while welcome, is hardly going to make a big difference to most schools’ budgets. The fact that 12% of the 4.3% of other expenditure was spent on PFI costs suggests that for some schools this is a real burden and must affect how they can manage their budgets. It would be helpful if the DfE could have shown this table for schools with PFI costs and those without that burden. Some eleven schools are shown in the detailed tables with expenditure of more than £1,000,000 on PFI costs, with one school in the South West paying more than £2,000,000. Not surprisingly, its expenditure on both teaching staff and resources is not at the upper end of the scale.

The data on supply staff costs looks somewhat suspect, since some schools may have filled the same figure in for both supply teaching staff and agency teaching staff columns, generating an overall total that is twice both amounts. This might be the case in some schools, but seems too common not to be worth investigating further. However, the school that spent £1,700,000 on supply staff doesn’t fall into that category of schools.

With the announcement from the Secretary of State at the NGA Conference, we can now expect more of this information, including for multi-academy trusts.

 

Figures back heads views on funding pressures

Most commentators will be focusing on the primary performance data published today. I am sure that is not why the DfE also chose to publish the annual update on maintained school finances for 2016-17 today. https://www.gov.uk/government/statistics/la-and-school-expenditure-2016-to-2017-financial-year

Although this is time series data, comparisons from year to year are handicapped by the conversion of schools to academy status and their removal from these tables. Nevertheless, at the national level, some pointers do become clear, especially as the funding between academies and maintained schools is now roughly the same for most of their government funded revenue income. They do, of course have different accounting years, and this can affect issues such as spend on salaries and the payment of increments.

If the average percentage of revenue income held as balances by maintained schools  is considered, this has now started reducing after a long period when the percentage was on the increase in both the primary and secondary sectors.

Maintained  Schools:

Total revenue balance as a % of total revenue income

Primary Secondary
2009-10 5.9% 3.2%
2010-11 6.6% 3.9%
2011-12 7.9% 5.6%
2012-13 7.9% 6.2%
2013-14 7.9% 6.4%
2014-15 8.2% 5.0%
2015-16 8.4% 4.6%
2016-17 7.4% 3.0%

This is the first year that the primary sector has recorded a decline in balances as a percentage of revenue income. In the secondary sector, the decline started in 2014-15 and there has now been three years of declining revenue balances overall.

For schools with a deficit, overall the aggregate position is also deteriorating:

Primary Secondary
2009-10 (3.5)% (4.0)%
2010-11 (3.6)% (4.8)%
2011-12 (3.7)% (5.7)%
2012-13 (3.1)% (5.2)%
2013-14 (2.9)% (5.8)%
2014-15 (3.3)% (7.3)%
2015-16 (3.0)% (7.7)%
2016-17 (3.5)% (8.4)%

Again, the position is worse in the secondary sector. This may be partly due to the remaining secondary schools that haven’t converted to academy status being more likely to be in deficit. Of the remaining maintained secondary schools included in the data for 2016-17, 26% had a deficit budget compared with just 7% of primary schools. This may also reflect the fact that rolls have been rising across the primary sector but falling until this year across the secondary sector.

The average spend on teaching staff increased in the primary sector by £68 per pupil and in the secondary sector by £58 per pupil over the two years 2015-16 and 2016-17. In the same period, the primary sector reduced running costs by £30 per pupil and secondary sector by £25 per pupil.

Schools overall increased non-government revenue income by £25 per pupil in the primary sector and £13 in the secondary sector in this period. Some of this is just income taken in to cover the costs of trips, meals and other expenses, but it also includes parental contributions and donations.

Overall, the figures show that the squeeze on income is now really beginning to affect schools, especially in the secondary sector. These figures back up the complaints of secondary head teachers about their funding levels. With general inflation now over three per cent and the  need to offer recruitment and retention payments to counteract below inflation pay increases, the next few years are going to be challenging times for maintained schools, and almost certainly for academies as well.

Schools can no longer rely on dipping into their saving for a rainy day: that day has now arrived and the cash is being used up.

 

 

 

Keep fire sprinkler systems for new schools

Building Bulletins are somewhat of an esoteric area of education policy. Nonetheless they are an important one and over the years have helped shape policy on school design and architecture. They haven’t always got it right, and there is always a tension between design standards and the cost of building a new school. Indeed, some local authorities have space standards for new schools that are more demanding that those issued by the government. But, they have been an important part of our education policy agenda for as long as I can remember.

Indeed, my first fieldtrip as a lecturer way back in the early 1980s was with a group of MA students, from the now University of Worcester, to interview then then head of Architects and Building Branch at the DES, located as it was in those days in a 1960s office block adjacent to Waterloo Station.

Now, I don’t often pray in aid the Daily Mail or the Mail on Sunday in this blog, but they seem to have unearthed an important story about the government downgrading the need for fire sprinkler systems in new schools to be built in the future http://www.dailymail.co.uk/news/article-3761631/You-putting-children-s-lives-risk-Safety-storm-Ministers-drop-requirements-fire-sprinklers-fitted-new-schools.html This at the end of a week when a secondary school in Sussex was partly gutted by a fire.

Arson of school buildings, although not as prevalent as a few years ago, remains a risk to school, especially as the new school year approaches. Sprinklers, at least to the standard of protect the building, can play an important part in reducing fire damage. There is a higher, and presumably more costly standard of protecting lives that would presumably only apply to boarding premises in schools as most schools can easily be evacuated, and fires, especially arson, often start when the school is empty.

If the change to Building Bulletin 100, issued by the Labour government in 2007, is true and there will be no need for sprinkler systems to be fitted in new schools that seems a short-sighted move to me. However, the government will increasingly have to bear the cost of any fire damage as academies will be their responsibility and not under the oversight of local authorities, so presumably someone has decided that the cost of either higher insurance premiums for the greater risk of a building without a sprinkler system or the re-building cost outweighs the cost of installing systems in all news schools funded by the DfE through the Funding Agency.

Personally, I think this a short-sighted decision that doesn’t take into account the personal costs involved in a fire that destroys a school and all the work of pupils and staff it contains. Water damage, although bad, is half as destructive as a school gutted by a fire. I would urge everyone that reads this blog to follow-up on this story and question the appropriateness of the decision. After all, we don’t want to see arson levels return to where they were in the bad old days.

 

26th STRB Report published

The School Teachers’ Pay Review Report, sent to the government at the end of April, was finally published today. I posted a blog on the 24th May wondering about its non-appearance. My speculation was that it might contain some facts and conclusions on teacher supply, recruitment and retention that would make uncomfortable reading for Minister. In one sense this has proved to be the case.

Although the STRB finally conclude:

Taking all these factors into account, and balancing risks to recruitment and retention against the importance of giving schools time to plan for managing a higher uplift, we judge there would be significant risks associated with a recommendation this year for an uplift of more than 1% to the national pay framework.

However the next paragraph provides something of a warning to Ministers by commenting:

However, if current recruitment and retention trends continue, we expect an uplift to the pay framework significantly higher than 1% will be required in the course of this Parliament to ensure an adequate supply of good teachers for schools in England and Wales. Accordingly, we recommend the Department, and our consultees take steps to help schools prepare for such an eventuality

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/535042/55621_School_Teachers_Accessible.pdf

It is difficult to make a clearer statement than that about what’s happening to teachers’ pay. The Report is mostly silent on the issue of conditions of service. Whether government will listen is another matter.

The Report was, of course, prepared before the Referendum vote and the economic shocks that are beginning to affect the markets. In that respect, I am reminded of the consequences of the oil price shock in 1972 and what it did for the British economy. In those days the London Stock Exchange had but one index of share price movement, the FT 30 Index, made up of 30 leading shares. It used a geometric rather than arithmetic mean as the basis of its calculations, thus in some cases understating the magnitude of any change. Even so, the market collapsed from a high in 1972 of 543.6 to a low on January 6th 1975, when most traders returned after the holiday break, of just 146. This was a slide in under three years of some 80% in real terms after inflation. It also followed the two general elections of 1974

Hopefully, the departure from Europe won’t create such a fall in the value of shares and the knock-on effects on the rest of the economy, but if it does, then who knows what will happen to teacher supply? The pound dollar rate has already fallen from the 1.40s:1 rate before the referendum to under 1.30:1 as I write and there is an emerging consensus it will end 2016 at around 1.16:1 or $1.16 per £1. http://www.bbc.co.uk/news/business-36721278 There are even some pessimists predicting the £ will fall below parity with the dollar.

All of this is a way of saying that the STRB Report, although interesting, could be consigned to the dustbin of history. Economic downturns have a history of attracting recruits into teaching and persuading those already there to stay. Will that happen; who knows. An alternative scenario is that with a relatively young profession, many abandon teaching here and head for jobs overseas where their skills might be better rewarded and they can save for a return sometime in the future. I guess we will all have to watch and wait, that is except for those that take action and do something.