How do school budgets work?

School budgets can seem confusing even to those charged with creating them. The funding models are famously complex, with multiple streams of different amounts available depending on often obtuse-seeming pupil, geographical or economic specifications.

And yet, understanding school budgets is essential for the community of businesses, organisations, charities and groups that work within the education sector. To understand how your service or product fits into the education market, you first need to understand how school budgets work. 

How primary budgets work 

Amanda Wilson, headteacher at St Alfege with St Peter’s CE Primary School, Greenwich 

The financial year for maintained schools and academies differs: the former runs according to the usual financial year (April to March), while the latter runs to the academic year. As such, exactly when headteachers start thinking about the details of the next year’s budget will differ. 

I start thinking about it at the end of the autumn term. I will look at what I have spent so far, the focus for school development for the new academic year and the different sources of funding I know I’ll have coming in. 

For most schools, the majority of their budget goes towards staffing costs. In an ideal world, 70-80 per cent of your budget should be allocated towards staff pay, including on-costs such as pension contributions and national insurance.

In reality, for a lot of schools - including my own - this percentage is higher depending on their staffing structure, the experience of staff in their school and any pay increases the government agrees to but doesn’t fund. 

The rest of my budget is allocated to areas such as buildings and maintenance, learning resources (ie, curriculum), catering supplies and cleaning. This list will vary from school to school. 

Once the overall budget has been set, it’s broken down into cost centres. In my school, different leaders then have responsibility for how the money in that cost centre is spent. For example, my premises manager is responsible for cost centres such as cleaning, and repairs and maintenance, while each of my curriculum leaders has responsibility for a cost centre. 

It’s up to these leaders to decide how to spend that money and they know that when it’s gone, it’s gone (most of the time). However, everything is run by me first. If there’s a specific project that one of my curriculum leaders will be running, this will be factored in when I’m setting the budget. For example, we know we’ll be buying into [digital reading software] Accelerated Reader for another year, so I’ve ensured there’s money available. When setting the budget, I also plan for things such as our termly Ignition Days and start-of-year class set-up. 

As I enter my fourth year as a headteacher, I’m beginning to feel like I actually know what I’m doing and what everything means when it comes to the budget. But I would say wholeheartedly that what has also helped is having a school business manager who is completely on the ball and a bursar who provides us with clear documents and sound advice. Without the two of them, I’d be lost. 

How secondary budgets work 

Alison Brannick, principal at Landau Forte College in Derby

Our overriding focus when making budget decisions is to ensure we direct resources to the classroom wherever possible. We are an oversubscribed school with an “outstanding” Ofsted rating, so we must be sure that our provision will remain unchanged when making budgeting choices.

This is exacerbated by the fact that we’re facing a “bulge” year across Derby in terms of student numbers, so we will be welcoming more students from September while still making sure we offer the same quality of education for them all. 

We belong to a trust, and within that, principals are responsible for everything relating directly to education and curriculum in their schools. Budgeting is carried out in partnership with the trust’s head of finance and the deputy CEO, who also operates as our CFO. There is strong support from the trust when setting budgets, and the central staffing ratios. We work as a team and regularly discuss the rationale for staffing levels to ensure these are as efficient as they possibly can be. 

Of course, setting the budget for this year is particularly challenging. We need to cover rising energy prices across the school and planned increases to teachers’ pay, while still setting aside additional funds for any unforeseen increases and trying to maintain our current level of funding across the school. This really hasn’t been helped by lagged funding; while this would have been manageable in previous years, the additional pressures we’re facing mean we are likely to have to make some compromises. 

Bearing these budgetary constraints in mind means that our team spends significant amounts of time looking to see where we can improve our finances. Again, this is a team effort, and any action to reduce spending is discussed internally before being modelled, and then taken to the trust so that we can access any extra support we might need in taking these necessary actions. 

How MAT budgets work

David Clayton, chief executive at Consilium Academies

Our central aim when it comes to creating our budget is freeing our school leaders from tasks unrelated to teaching and learning. This way, they can focus on school improvement and serving their communities, which is what they do best.

However, it is critical for us that our school leaders are empowered to have input into our strategy so they can ensure it is delivering what their schools need. 

At Consilium, we take a central approach to budgeting, whereby we pool our funding. Centrally, it is our responsibility to deliver education to every one of our 6,071 students. A collective pool of resources allows us to give every student the same opportunities and means we can deliver services more efficiently. For example, we invest in highly skilled specialists within our central team including expert leadership in finance, HR, estates, ICT, governance, CPD and safeguarding as well as school improvement. 

This brings huge benefits to our schools, and ultimately means that every one of our schools has access to high-quality support, and every student gets a fair deal. Rather than referring to these services as “back office”, we see them as “enabling” services - because they play a key role in our school improvement strategy. We routinely evaluate how these services are delivered in every school, whether they’re provided in-school through an external provider, or centrally through the trust. 

As part of this, we’re always looking to achieve best value for money for the trust, which often leads to grouped purchases across multiple schools. This results in cost savings and also time efficiencies, as it means we can manage single orders rather than multiple. For every decision we take, we always go back to our key strategic aim of school improvement and ask ourselves the question: what will add the most value to any given process and, ultimately, for every child in our care? 

Often, these decisions are taken centrally but with the input of our school leaders, who ensure that these decisions meet the individual needs of our students. Of course, there are always conflicting demands on our budget, including a long wishlist we would love to be able to fulfil. Managing these demands is challenging because, inevitably, we can’t do everything. 

Our culture of collective responsibility and value of equity drives our decision-making, so our school leaders work with us to make the best decisions for all the students in our trust, not just the ones in their schools. Balancing budgets is becoming increasingly challenging in the current climate, and this puts pressure on the whole education system to balance the needs of the children with the availability of resources. 

Working as a trust means we have the opportunity to work as efficiently as possible across all our schools to reduce the impact of these pressures, but even the most efficient trusts will be facing very difficult choices following recent announcements. 

There are significant elements of the budget that are out of our control, so we are constantly planning for a number of scenarios and preparing to change plans quickly.

This includes predicting student numbers and demographic-based assumptions such as pupil premium numbers; ensuring future-year pay increases are accurate; and anticipating subtle changes to funding levels, which can make a significant impact on budgeted income and the need for a long-term capital strategy (with the bids completed year-to-year as each round of funding is announced, it’s difficult for us to plan our investment decisions in the longer term). 

Last-minute announcements make this picture more complicated - for example, around pay increases. Late changes such as these make balancing the need to invest in the core function of each of our schools, along with investing in ageing buildings and technology with very limited resource, much more complex.

Equally, the restrictions around some funding streams - for example, tutoring and recovery - can often be tricky for even the most financially savvy trusts to navigate, meaning that we can find ourselves working around the restrictions rather than having the flexibility to use funds in the best way for the benefit of our students. 

During the pandemic, our biggest challenge has been managing the cost of staff absence. We are a people-centred employer; our people are our greatest resource, and our decisions place the health, safety and wellbeing of our staff at the forefront.

However, offering the highest-quality support and CPD comes at a significant cost, and on top of that, we have had to make challenging decisions about spending priorities because costs of cover have been exceptional. Combined with the challenges caused by recent economic events, this is a very difficult time for schools and trusts across the sector to balance their budgets.