Forty-Second Report - Financial sustainability of schools in England

Select Committee

Public Accounts Committee HC 650 4 March 2022

Report Status Government responded

Conclusions & Recommendations 27 items (10 recs)

Source View on Parliament website

Government Response (AI assessment · 25 of 27 classified)

Accepted 21

Deferred 1

Not Addressed 1

Recommendations

10 results

2 Accepted

The large reserves that some academy trusts are building up mean that a significant amount...

Recommendation

The large reserves that some academy trusts are building up mean that a significant amount of funding is not being spent on educating pupils currently in school. In the year ending 31 August 2020, nearly a quarter of academy trusts … Read more

Government Response Summary

The Department wrote to the Committee on 23 March about academy trusts holding large reserves; will seek information from trusts with reserves over 20% of income about their plans for these funds in July 2022; and is exploring further guidance to help academy trusts strike the right balance between holding sufficient reserves and using funds to benefit current pupils.

HM Treasury

3 Accepted

We are concerned that financial pressures faced by schools could damage children’s education.

Recommendation

We are concerned that financial pressures faced by schools could damage children’s education. Research by Ofsted in 2019 found that a high proportion of headteachers reported reducing staffing levels, narrowing the curriculum and changing how they support pupils with SEND … Read more

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of the additional funding announced for schools; publication is expected by end-March 2023.

HM Treasury

4 Accepted

While we wait for the much-delayed SEND review, the support system continues to fail many...

Recommendation

While we wait for the much-delayed SEND review, the support system continues to fail many children and remains financially unsustainable. In May 2020, we reported that many children with SEND were being failed by the support system and recommended that … Read more

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022 and will publish a national SEND delivery plan later in 2022.

HM Treasury

13 Accepted

The ESFA explained that, in looking at an academy trust’s reserves position, an important question...

Recommendation

The ESFA explained that, in looking at an academy trust’s reserves position, an important question was how much the trust had designated for capital works, school improvement and projects to take on a new school with challenges. If the amount … Read more

Government Response Summary

The government will use the next Budget Forecast Return (BFR) in July 2022 to seek information from trusts with reserves over 20% of income about their plans for these funds and explore further guidance to help academy trusts strike the right balance between holding sufficient reserves.

HM Treasury

14 Accepted

The ESFA said it expected that, for the very great majority of academy trusts, the...

Recommendation

The ESFA said it expected that, for the very great majority of academy trusts, the level of reserves was either reasonable or, where the level on the face of it looked high, the amounts were being held for a particular … Read more

Government Response Summary

The government will use the next Budget Forecast Return (BFR) in July 2022 to seek information from trusts with reserves over 20% of income about their plans for these funds, and is exploring further guidance to help academy trusts strike the right balance between holding sufficient reserves and using funds to benefit current pupils, building on existing Charity Commission guidance.

HM Treasury

15 Accepted

In 2018, our predecessor Committee, in light of its concerns about the wider issues affecting...

Recommendation

In 2018, our predecessor Committee, in light of its concerns about the wider issues affecting the school system, asked Ofsted to reflect on the main risks to schools’ effectiveness and the systemic causes of poor performance, including the impact of … Read more

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of the additional funding announced for schools, with publication expected by end-March 2023.

HM Treasury

17 Accepted

We asked the Department whether it was aware of the measures schools were taking in...

Recommendation

We asked the Department whether it was aware of the measures schools were taking in response to financial pressures and if they were a cause for concern. The Department told us it had been encouraged that, during the period when … Read more

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of the additional funding announced for schools, with publication expected by end-March 2023.

HM Treasury

19 Accepted

Ofsted’s research also found that 44% of primary headteachers and 67% of secondary headteachers reported...

Recommendation

Ofsted’s research also found that 44% of primary headteachers and 67% of secondary headteachers reported that responses to financial pressure had led to some reductions in curriculum breadth.41 We asked the Department whether it was monitoring whether schools were dropping … Read more

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of the additional funding announced for schools, with publication expected by end-March 2023.

HM Treasury

20 Accepted

The Department has not to date carried out its own research into the impact of...

Recommendation

The Department has not to date carried out its own research into the impact of financial pressures on schools’ provision.43 The ESFA told us that it would now do a proper study on this area, with a representative sample of … Read more

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of additional funding, with results expected by end-March 2023.

HM Treasury

26 Accepted

In our report in May 2020, we found that there were not enough state special...

Recommendation

In our report in May 2020, we found that there were not enough state special school places in some parts of the country, meaning that local authorities had to cover the high cost of places in independent schools and spend … Read more

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022 and will publish a national SEND delivery plan later in 2022.

HM Treasury

Conclusions (17) Observations and findings — click to expand

1 Conclusion Not Addressed

On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department for Education (the Department) and the Education and Skills Funding Agency (the ESFA) on the financial sustainability of schools in England.1

Government Response Summary

The government provides a basic acknowledgement of the report and the evidence session, without addressing any specific findings or recommendations.

5 Conclusion Accepted

In 2018–19, the Department introduced a new national funding formula with the aim of allocating funding for schools more transparently, consistently, and fairly.6 We reported in October 2021 that the national funding formula had led to a re-balancing of funding away from more deprived schools towards less deprived schools. Between …

Government Response Summary

The government agrees to thoroughly investigate the geographical variation in the financial health of maintained schools, determine the underlying causes, and decide whether some schools or local areas need extra support from 2022-23, with a target implementation date of March 2023.

6 Conclusion

The COVID-19 pandemic has had a significant impact on the school system but data are not yet available to indicate how schools’ financial health has been affected.11 The Department is providing extra funding to help schools cover costs relating to COVID-19, mostly for catch-up learning, but does not know the …

7 Conclusion

Maintained schools report their finances for the year ending in March. Most maintained schools were in surplus from 2014–15 to 2019–20, with 88% reporting a cumulative surplus in 2019–20. However, the proportion reporting a deficit more than doubled from 5% to 11% over the same period.15 The proportion of maintained …

8 Conclusion Acknowledged

We asked the Department why so many maintained schools were in deficit. The Department highlighted that the financial health of the school system had held up well and that most maintained schools and academy trusts were in surplus. The ESFA noted that only four local authorities had a net deficit …

Government Response Summary

The government agrees with the Committee’s recommendation and states that the national funding formula (NFF) distributes funding to schools fairly, regardless of geographical location. They are introducing a consistent approach to budget planning and monitoring across local authority-maintained schools, including analysis of reserves in different phases, and a local authority level breakdown.

9 Conclusion Accepted

The ESFA recognised that it needed to explore the geographical variation further and do more analysis, noting that the local authorities in the greatest difficulty were in different parts of the country. It said that, as maintained schools are funded on the same basis as academies, the position came down …

Government Response Summary

The government agrees to thoroughly investigate the geographical variation in the financial health of maintained schools, determine the underlying causes, and decide whether some schools or local areas need extra support from 2022-23, with a target implementation date of March 2023.

10 Conclusion Accepted

The ESFA told us that it was also keen to explore the reasons why maintained secondary schools appeared to be in more financial difficulty than maintained primary schools. The Department explained that the differences in the financial health of maintained primary and secondary schools had principally been driven by the …

Government Response Summary

The government agrees to thoroughly investigate the geographical variation in the financial health of maintained schools, determine the underlying causes and decide whether some schools or local areas need extra support from 2022–23 to be sustainable and will monitor variations in phases and collect perspectives on financial health from local authority-maintained schools in different geographical areas.

11 Conclusion Accepted

Academy trusts report their finances for the year ending in August. In 2019/20, 93% of academy trusts reported a cumulative surplus, up from 88% in 2017/18. The proportion reporting a cumulative deficit fell from 7% to 4% over the same period.25 The net position for the academy sector as a …

Government Response Summary

The department is planning to use the next Budget Forecast Return (BFR) in July 2022 to seek information from trusts with reserves over 20% of income about their plans for these funds.

12 Conclusion Accepted

We asked about the large reserves that some academy trusts seemed to be building up. In 2019/20, 22% of academy trusts had built up reserve balances equivalent to more than 20% of their annual income. The ESFA told us that it wanted academy trusts, as charitable trusts, to hold reserves …

Government Response Summary

The Department wrote to the Committee on 23 March about academy trusts holding large reserves; will seek information from trusts with reserves over 20% of income about their plans for these funds in July 2022; and is exploring further guidance to help academy trusts strike the right balance between holding sufficient reserves and using funds to benefit current pupils.

16 Conclusion Acknowledged

We have heard examples of local schools taking steps such as cutting staff, particularly teaching assistants, and reducing provision for pupils with SEND, in order to make savings.34 We also received written evidence from stakeholders in the sector about how schools had responded to financial pressures and the damaging impact …

Government Response Summary

The department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of additional funding, with results expected by end-March 2023.

18 Conclusion Deferred

The Department told us that staff-pupil ratios had stayed relatively stable, as had the number of teaching assistants across the school system. We note, however, that while the ratio of pupils to teachers remained relatively stable in nursery and primary schools from 2014 to 2020, varying between 20.3:1 and 20.9:1, …

Government Response Summary

The response addresses a different conclusion and recommendation (PAC conclusion 3). The government agrees with the Committee’s recommendation and states that the department will commission research on how a sample of schools has experienced and responded to previous financial pressures and on the anticipated impact of the additional funding announced for schools. Publication is expected by end-March 2023.

21 Conclusion Accepted

In May 2020, we reported on the support in place for children with special educational needs and disabilities (SEND). We concluded that many children with SEND were being failed by the support system and recommended that the Department should, as a matter of urgency, complete its SEND review which had …

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022, with a national SEND delivery plan to be published later in 2022.

22 Conclusion Accepted

We asked the Department why it had not made more progress in completing the SEND review. The Department told us that the review had been delayed as a result of the COVID-19 pandemic. First, it had paused work on the review and diverted resources 38 Qq 93–95 39 Q 56 …

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022, with a national SEND delivery plan to be published later in 2022.

23 Conclusion Accepted

The Department acknowledged that the SEND review had been far too long delayed and said that the Secretary of State had now committed to publishing the results of the review in the first quarter of 2022, alongside the Schools White Paper. Members noted that the support system was still not …

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022, with a national SEND delivery plan to be published later in 2022.

24 Conclusion Accepted

We asked the Department what the metrics of success for the SEND review would be and how it would know that it had succeeded in giving the necessary support to children with SEND. The Department told us that the goal of the review was to improve outcomes for children and …

Government Response Summary

The government agrees with the Committee’s recommendation and published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022.

25 Conclusion Accepted

The Department funds local authorities for support for children and young people with high needs through the dedicated schools grant. The number of local authorities reporting a deficit on their dedicated schools grant increased from five of 150 in 2014–15 to 94 of 149 in 2019–20. The total deficit, for …

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022, with a national SEND delivery plan to be published later in 2022.

27 Conclusion Accepted

The Department said it had secured additional funding in the 2021 Spending Review including a capital settlement of £2.6 billion, part of which was for additional specialist provision.53 It told us that, as well as the extra funding, it was working directly with those local authorities with some of the …

Government Response Summary

The government published the outcome of the SEND Review in the Special Educational Needs and Disability and Alternative Provision Green Paper on 29 March 2022, with a national SEND delivery plan to be published later in 2022.