Half of academy trusts could be in deficit in two years

More than half of academy trusts in England could fall into deficit within two years without additional financial support, a new analysis suggests.

The Confederation of School Trusts (CST) said higher-than-expected, unfunded pay offers for staff, spiralling energy costs and inflation had led to huge budget blackholes.

As a result, trusts are already looking to make cuts including reducing curriculums, increasing class sizes and closing specialist facilities in specialist and alternative provision (AP) schools.

The findings come amid of backdrop of real-terms spending cuts for schools due to the hike in operation costs.

Data published by the National Education Union on its school cuts website predicts 90 per cent of schools will have lower per pupil funding in real terms in 2023-24, compared to the current financial year.

Leora Cruddas, CST’s chief executive, called on the government to intervene “as matter of urgency” to help trusts meet rising costs.

“We know economic times are tough, but our school trusts have the talent and expertise to find innovative and cost-effective ways to keep improving education and supporting their local communities,” she added.

“They can’t do this on shifting foundations though. They need government to help by setting out spending plans that they can rely on for not just the next six months, but for multiple academic years beyond.”

Budgets were planned before pay announcement

An analysis of budget forecast submissions and responses to a survey covering almost 1,000 academies found that if cost pressures remained the same, more than 50 per cent of trusts could be in deficit by 2024-25, while average reserves could fall as low as 1 to 1.5 per cent.

Cruddas noted that budget forecasts submitted to the Education and Skills Funding Agency in July were “out of date within just days” because of the late announcement of pay offers.

“That is frustrating not just for the wasted effort, but for the damage it does to the ability of school trusts to plan ahead, and to tackle economic challenges,” she said.

It follows the publication of a survey by headteachers’ union NAHT earlier this week, which found that more than half – or 54 per cent – of schools said they would go into deficit this year without making further cuts.

Another recent survey, by the ASCL leaders’ union, found most schools would likely cut staff, increase class sizes and axe building repairs over the coming years to deal with rising costs, with some secondaries facing a £500,000 hit.

CST’s report is likely to pile pressure on government, given that the financial health of trusts affects multiple schools at once.

Most academy trusts don’t have confidence in energy support

In July, the government announced a 5 per cent pay rise for most teachers in 2022-23, an increase on the 3 per cent originally put forward, but still well below inflation. Starting salaries also increased by 8.9 per cent.

A pay rise of 10.5 per cent for school support staff, worth £1,925 this year, was accepted by unions last week. Neither of the pay offers will be funded with extra government cash.

Meanwhile, support for schools through the government’s energy bill relief scheme is not guaranteed beyond March next year.

Two-thirds of trusts are on energy contracts that are due for renewal after that point.

According to CST’s survey of members, less than a quarter “have confidence” in government interventions to ease the burden of rising energy costs.

Schools Week reported in September that even under the “guarantee”, some schools could still see their gas bills more than double.

Rising inflationary costs to deliver “under-funded” provision such as free school meals and breakfast clubs are also cited in the report as impacting budgets.

The CST said members were “exploring how to maximise income” through strategies such as leasing their facilities and re-targeting capital spending on energy saving measures.

But it added that trust finance officers had already cut estimated reserves at the end of this academic year by an average of 40 per cent compared to original forecasted budgets.

The Department for Education was contacted for comment.