School funding

Struggling schools miss out on ‘hardship’ funding

One local authority kept the entire government allocation to itself to cover its own deficit

One local authority kept the entire government allocation to itself to cover its own deficit

24 May 2024, 9:00

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Up to 90 per cent of schools wrestling with deficits in areas splitting £20 million “hardship funding” to help cover teacher pay rises have missed out on the extra cash.

A Schools Week investigation has also found that one local authority kept the entire government allocation to itself to cover its own deficit, depriving struggling heads of the money.

Meanwhile, leaders in other areas said decisions over which of the LA-maintained schools got the funding were made with “no logic”. Some with surpluses were getting help ahead of those in the red.

Hilary Goldsmith
Hilary Goldsmith

The government set up the fund to help council-maintained schools “facing the greatest financial challenges” afford last year’s 6.5 per cent teacher pay rise.

But school business leader Hilary Goldsmith said the funding was “so low” that it could only at best “plug a hole in a sinking ship”.

She added: “Doling out handouts to the poorest schools does nothing to help them overcome the fundamental issues they will be facing – regardless of the reasons for their deficits.”

One-off grants ‘do nothing’ to help

The one-off government fund was “targeted” at local authorities with aggregated school-level deficits totalling more than 1 per cent of their schools’ income.

Just 35 of the country’s 153 councils were allocated a share of the cash. A further £20 million was used to top up the existing support offered to academies in financial difficulty.

Of the 16 councils who responded to our freedom of information request, 32 per cent of their schools in deficit last year missed out on any cash.

In Northumberland, documents show that the council had 23 maintained schools with total deficit balances of £2.7 million. The £344,000 it received from the fund is less than 13 per cent of this.

Council chiefs opted to take “a targeted approach” by awarding the money only to those “in the most serious financial position”. Twenty-one schools (91.3 per cent) lost out, as two schools – with combined deficits of £1.3 million – split funding.

A spokesperson said this approach “would have the most impact on our young people”.

‘Schools forum makes the decision’

Just one of Sheffield’s 10 deficit schools was awarded the council’s full £518,000 allocation, after it was found to be the furthest away from balancing its books.

A separate £60,000 pot – contributed to by schools from their own budgets – was shared equally between six primaries.

Cllr Dawn Dale, the chair of Sheffield’s education, children and families committee, said decisions on funding were made by its schools forum “as a whole, rather than being a [council] decision”.

Meanwhile, 12 (39 per cent) of North Yorkshire’s 31 deficit schools missed out on any of the £972,000 awarded to the authority.

A council spokesperson stressed that only those expected to remain in deficit over the next two years were eligible for the payments of up to £100,000. 

Government guidance states that officials expected “funding to be allocated on a case-by-case basis, taking into account the severity of the school’s position and prioritising those in greatest need”.

‘No logic’ to decisions

It added that not “every school with a deficit within that local authority should be given additional funding”.

 An application process was launched by Worcestershire to determine how the grant would be distributed. Council officials expected the funding would go towards “one-off revenue costs to achieve long-term… savings and sustainability”.

Headteacher Bryn Thomas, who will receive a portion of the cash, called this “a fair and open process”. 

Elsewhere, however, leaders have criticised how the money was distributed. Minutes from a Hillingdon schools forum meeting in January show members noted that “there seemed no logic to the proposed allocation of funding” put forward by the council.

They argued that three primaries would have their “relatively small deficits… reduced to very small amounts, while a secondary that was £2.4 million away from balancing its books would receive £186,000”.

This “would not have much of an impact”, they argued, with several members calling for the entire £491,000 sum allocated to the authority to be handed to the secondary.

The council argued that it had ensured “all of those in receipt of the funding were given an appropriate and effective allocation”.

On the Isle of Wight, headteachers were said to be “unhappy that the additional support had not been available for all schools who are struggling”.

It seemed “unfair” to them that those “who are managing to balance their budget appear to be penalised for doing so”.

Money used on DSG deficit

The DfE also stressed seven months ago that “significant flexibility over how this funding can be used” would be given to local authorities.

Of those that responded to our FOI, Walsall was the only council to say it had not allocated its split of the hardship fund to any schools.

Stephen Morales
Stephen Morales

Instead, all the cash was used to prop up its dedicated schools grant deficit in 2023-24, which it said was “in line with guidance”.

The cumulative deficit in 2022-23 was just over £500,000. This year’s figure has not yet been published.

Institute of School Business Leadership CEO Stephen Morales said: “There’s clearly a policy intention here for this money to go towards [councils’] structural deficits.

“But it’s then wrong [for the government] to say there’s an additional £20 million being injected into individual schools when that isn’t always the case.”

Money spent on ‘support and monitoring’

Lambeth also put £70,000 of its allocation towards “support and monitoring resources”, having assessed whether this “would also help work towards further reducing deficits”.

And in Enfield, £12,500 was used to provide schools with “specialist advice” on things like “contract reviews, budget monitoring, benchmarking”.

Schools in surplus on the Isle of Wight were awarded the cash while two in deficit missed out. But the council said these schools were forecasting deficits.

Southwark council refused our request for information as it feared disclosure could spark “distress and mayhem, possibly leading to children being pulled out of certain schools, making the whole situation even more difficult to manage”.

It argued that the “panic” would also spark an “excessively high number of enquiries from parents, and possibly also the press”, which would cause “considerable disruption” to schools’ day-to-day provision.

Meanwhile, figures show just how inadequate the cash has been. Despite receiving £288,000 through the fund, Somerset has seen 27 schools record an overall deficit for 2023-24, up from five the year before.

‘Billions away from funding we need’

Louise Gittins, chair of the Local Government Association’s children and young people board, said “many schools have been raising concerns about their financial stability”.

Morales estimated that “we are in the billions away from a package that will adequately avoid many schools and trusts from falling off a cliff … £20 million will do absolutely diddly squat”.

Goldsmith said that “support needs to come from [local authorities] to help schools before they get into difficulties”.

“But sadly, many LAs now lack the funding to operate effective financial support services for schools who are starting to head towards difficulties.

“So, rather than band aid funding, we really need to see some firm commitment from government to invest the funding that schools need just to break even.”

A DfE spokesperson said mainstream schools and high needs funding “was over £3.9 billion higher in 2023-24 compared to the previous year, taking school funding to £57.7 billion”.

 The department gave councils “flexibility on how to allocate the funding to help their schools move towards a sustainable long-term position”.

The spokesperson added: “We are continuing to take action to help those authorities with deficits.

“Many local authorities have a surplus on their Dedicated Schools Grants accounts, and we have published guidance on good practice, drawing on the work of these financially successful authorities.”

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