Academy trusts in financial trouble should not get government bailouts unless they agree to mergers or to clear out “failing management”, a former academies minister has said.
It comes after two trusts were given multi-million pound lifelines after racking up £600,000 deficits – citing lagged funding, falling rolls and unfunded pay rises.
But sector leaders have urged ministers not to rely on rescue payments to prop up ailing trusts, with calls for more transparency over the deals as budgets are expected to be pushed to the brink by a gathering financial storm.
Speaking in the Lords last week, Lord Agnew, the Conservative academies minister between 2017 and 2020, said: “In my home county of Norfolk, at least two academy trusts have just received financial bailouts from the [Department for Education] that should have come with a requirement for mergers or a clear-out of failing management.
“That has not happened. This is where the government’s energy should be directed.”
Millions in loans
Agnew, chair of the Inspiration Trust, based in Norfolk, was speaking on a debate on the schools bill.
Broad Horizons Education Trust appears to be one of the MATs Agnew referred to.
After posting an overall deficit of £670,000 last year, the government offered it a “fully repayable” £2.7 million loan to ensure the trust could “maintain its operations” for another year.
The trust said rising heating, maintenance, and staffing costs had been “compounded” by the “sustained pupil growth of around 100 pupils per year over several years” at one of its schools.
Funding for this rise “lagged behind creating a cumulative shortfall that placed pressure on the trust’s budget”, it added.
Broad Horizons stressed it had “undergone a complete refresh of leadership” and “taken significant and difficult decisions to restructure both central services and staffing in schools themselves”. This included cutting 30 support staff.
The “strength of our financial management and the swift actions taken”, meant just £290,000 of the government loan had been used.
‘Unfunded pay rises’
Meanwhile, Synergy Multi-Academy Trust, also based in Norfolk, confirmed the DfE had approved an advance of up to £2.1 million. It had not yet used the cash, despite posting a £636,000 deficit last year.
Synergy said its new management “has been working on and implementing a phased plan” to balance the books by September 2027. This included “difficult decisions around staffing and the use of resources”.
It singled out “unfunded pay rises in past years”, SEND funding challenges and “falling pupil numbers in some of our rural catchments” for contributing to its struggles.
Sam Henson, the deputy chief executive of the National Governance Association (NGA), said the sector’s long-term health could not be based on bailouts or “punishing trusts that enter this scenario due to the fragility” of funding.
“We need an equitable and improved long-term strategy, one that looks beyond existing political spectrums and policy, one that stops treating children and schools as commodities and starts to invest in an authentic ambition for the next generation.”
The DfE would not provide bailout figures, saying the data was included in the academy sector’s annual report – but this is usually published two years late.
Analysis suggests 16 payments – totalling £4.7 million – were made to trusts in 2022-23, the latest year for which figures are available. In 2019-20 this was 34, worth more than £12 million.
However, unfunded teacher pay and national insurance contribution pressures are now hitting schools.
‘Financially unsustainable’
A third of respondents to the NGA’s annual governance report last year considered their school or trust “financially unsustainable without significant changes”.
The figure was highest among local authority-maintained school governors (46 per cent), compared with 29 per cent of MAT trustees.
The Southend High School for Boys has been given a loan after forecasting deficits of more than £650,000 this year. This was down to high staff retention resulting in an annual salary bill about £750,000 higher than in a similar school.
The trust has asked the government to change its “inadequate” funding approach after concluding minimum per-pupil levels were “insufficient to allow for significant local variations in costs”.
Dame Meg Hillier, the former chair of the Public Accounts Committee, said there was an “unacceptable lack of transparency and accountability” for parents and taxpayers.
A DfE spokesperson said it “engages supportively to provide practical advice and guidance” in cases where trusts “are experiencing significant financial difficulty”.
It may “also provide longer-term support that aims to prevent financial failure in the short term and secure the trust’s long-term sustainability”.
Your thoughts