Councils urged to claw back cash as ‘excess’ school surpluses top £500m

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Councils are being urged to claw back cash from schools holding “excess” surpluses – as new figures show the total amount stored away by cash-rich schools was nearly £600 million.

Department for Education figures published on Thursday show a worsening financial position for council-maintained schools – with more than three in ten secondary schools now in the red.

The average deficit posted by secondary schools last year also increased by nearly £70,000, to £484,000. The value of deficits across all council schools totalled £200 million, the figures show.

There are schools there that are literally on the bones of their backside and they’re being encouraged to balance the books when there are other schools that are serial surplus hoarders

However, that was dwarfed by the £1.8 billion of surpluses posted by council schools last year.

A deeper dive into the data also shows that the value of the “excess surplus” – anything above five per cent of a secondary school’s total income or eight per cent for primaries – held by schools was £580 million.

Government guidance states councils are able to claw back any excess surpluses, which then goes back into the main school-funding pot. But it appears the use of this is patchy.

Jon Andrews, director for school system and performance at the Education Policy Institute, said a way to “ease the pressure” on some schools would be to “recirculate some of the money that is sitting in surplus balance”.

This week’s figures show that, of the schools posting a surplus, more than four in ten had an “excess” surplus – suggesting clawback isn’t being used widely.

St Helens council, for instance, has a clawback mechanism in place, but has not used it for around six years. The decision on whether to use it is down to the council’s strategic director.

According to the St Helens Star, a school governor called on the council to implement the scheme during a recent schools forum meeting in October.

Frank Taylor, governor at Eccleston Lane Ends Primary School, was reported as saying: “There are schools there that are literally on the bones of their backside and they’re being encouraged to balance the books when there are other schools that are serial surplus hoarders.”

But, even if the council had used the clawback, Schools Week understands just £100,000 would have been recouped. This is because the mechanism – which has to be agreed by the schools forum – only recoups a small percentage.

Lancashire county council claws back 50 per cent of any balances above 12 per cent. However, a £60,000 minimum-balance threshold is applied. Where schools post a surplus over more than 12 per cent of their income for two or more years, the council recoups 100 per cent.

Shropshire council uses the government’s thresholds for recouping excess surpluses, but schools have to have posted surpluses above the thresholds for the past three consecutive years.

However, one council officer, who didn’t want to be named, told Schools Week the DfE had always insisted councils shouldn’t interfere too much in their schools’ budgets. Others said, in the current climate, councils may be reluctant to use claw back as it may encourage any remaining schools to become academies.

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Matthew Clements Wheeler

Matthew Clements-Wheeler, chair of the Institute of School Business Leadership, said there is “no appetite” among school leaders for schools that fall victim to financial mismanagement to be handed cash from “better-run” schools.

But he said schools holding “large sums” of money needed to explain why, adding that uncertainty over government funding for pay rises or increased pension costs, or for capital funding, are good reasons to hold extra cash.

“There’s a lot of uncertainty over funding, and schools will have been holding sums to ensure they are viable.”

Government guidance on schemes for financing schools for local authorities, published in March, reveals that council controls “may contain” a clawback mechanism.

But it states any controls should “have regard to the principle that schools should be moving towards greater autonomy”. It says the schemes should focus on “only those schools which have built up significant excessive uncommitted balances”.

Andrews, who plans to publish a deeper analysis of the figures in the coming weeks, said his research could explore which areas seem to be clawing back cash.

A DfE spokesperson said: “To end historical unfair funding for schools we have introduced the national funding formula – directing money to where it is most needed, based on schools’ and pupils’ needs and characteristics – but giving each local authority some flexibility to adjust funding to meet local needs.”




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