Struggling schools racked up £5m bank bill amid finance woes

Twenty-five struggling schools in a London borough racked up over £5 million in overdraft bills, it has emerged.

Barnet blamed an “administrative error” by NatWest for the issue, which left those affected facing average repayment charges of more than £200,000 each. However, the bank disputed the claim.

Experts have warned the discovery could be a “worrying indication of the fiscal pressure many small schools” are having to endure.

Overdraft discovery

Barnet schools forum papers show 84 school accounts have been opened through the council’s banking contract with NatWest. Twenty-one of these – held by 25 schools – were overdrawn, owing a combined £5.4 million.

The council did not name the schools but revealed the largest overdraft was £1.3 million.

The cash was spent on “day-to-day” expenditure, like teacher salaries, supply staff and site maintenance.

Stephen Morales, of the Centre for Educational Operational Excellence, said for some small primary schools, a quarter of a million pounds could be 25 per cent of their total budget.

“For even a reasonably sized secondary, that would be in excess of 5 per cent.”

Schools are “not allowed to be in an overdraft on their bank account”, according to council rules, as it is deemed a form of “external borrowing”.

Council flags

Barnet noted that any accounts that dip into their overdrafts “should be flagged to our client relationship team who would then contact us asking to clear the overdraft within 90 days”.

However, these cases “have not been flagged”. A council spokesperson said this was due to an “administrative error by NatWest”.

This meant officials were not “notified and able to arrange a cash advance with the school”. Despite this, Barnet said schools would have been aware, with one overdrawn for nearly a year.

The bank said it would be “inaccurate to report that there had been any administrative error by NatWest”. It also “does not oversee the day‑to‑day financial management of individual accounts”.

NatWest added: “Responsibility for managing and monitoring local authority and maintained school accounts sits with the relevant authority.

“Where customers operate group or pooled banking arrangements, individual accounts may move into debit while the overall facility remains within agreed limits.”

Falling rolls and energy costs

There can be occasions when a school is overdrawn but has enough in reserve to mean it is not in an overall deficit. But Barnet confirmed all the schools caught up in this issue were in deficit.

The council attributed the “significant financial pressures” faced in the borough to “rising staff costs, falling rolls, the cost of maintaining ailing buildings and the energy crisis” among other things.

Schools Week approached 15 schools in the area that went into deficit last year, asking them if they were overdrawn and why. None responded.

Barnet said government rules prevent it from being able to provide schools with additional funding to clear the overdrafts.

Instead, the council provided them with “cash advances”, which will be “repaid through deductions of future school budget shares”. The spokesperson confirmed the overdrafts have been paid off.

Morales added the situation “is surely a worrying indication of the fiscal pressure many small schools are suffering”.