Paying for staff salary increases that are “unfunded for the first time ever” and “political instability” are affecting investment in education and school buildings, major multi-academy trusts have warned.
In newly published annual accounts, two prominent MATs - including one set up by a former education minister - sound the alarm on how rising cost pressures, including “extreme inflation” in energy bills, mean they are faced with using cash reserves for day-to-day costs and delaying education, IT and capital spending plans.
New accounts for the 15-school Inspiration Trust warn that a decision was made in 2021-22 not to reinvest in year surpluses but to build up its reserves because of the concerns about the impact that “political instability and cost pressures” would have on its future finances.
The trust, which was founded by former academies minister Lord Agnew and has schools in Norfolk and Suffolk, warns in its accounts that its ability to deliver planned investment in the future in areas such as music and sport learning facilities will depend on how much of its reserves are needed for day-to-day running costs.
And it says that there is a risk that its extended school day could be cut if funding increases are not sufficient to meet basic running costs.
School funding: academy trusts face cost pressures
It adds that this uncertainty will also impact on its investment in efforts to become carbon-neutral and more energy efficient.
Its report says: “The trust has identified a number of areas it wishes to invest in over years, including further works to make our estate as energy-efficient as possible as we look to become carbon-neutral, other improvements to our buildings to ensure our students have the best possible learning and environments and access to high-quality sporting, music and performing arts facilities, as well as continued refreshes of our IT devices.
“However, our ability to make progress with our planned investment will depend on the amount of day-to-day running the costs the trust will be required to meet from existing reserves.”
An Inspiration Trust spokesperson said: “Inspiration Trust runs its finances carefully and maintains sufficient reserves for the sort of contingencies which have unfortunately arisen recently.
“In 2022, we have drawn upon our reserves where needed to support our plans as many other trusts have done. We are also phasing some strategic plans over a longer time period. That said, funding pressures and cost inflation are very real issues and are affecting schools and trusts right across the country.”
The accounts of Dixons Academies Trust, an expanding chain that runs 16 schools in the North of England, also contain warnings about the impact of cost pressures on the schools sector.
Its report says its finances and those of the rest of the schools sector are now “under threat because of salary increases unfunded for the first time ever, and especially because of extreme inflation in energy costs”.
It adds: “Government intervention on commercial energy contracts now offers some protection until March 2023.
“But further support will be necessary beyond that, if we can maintain the significant contribution we make to improve the education system in areas where it is weak. and desperately needed.”
Dixons’ accounts add: “The education sector faces uncertainty over the rising cost of energy and unfunded salary increases. The trust will draw upon its reserve balance to fund the salary increase and rising energy costs. Capital programmes may be delayed, which could impact on learning.”
Dixons’ chief executive Luke Sparkes said: ”Due to the extended energy relief scheme and the mainstream schools additional grant, alongside the in-year savings we have made, our position has improved significantly since we submitted our trust accounts.
“However, we will still need to pause most capital projects whilst we work to ensure financial resilience as we continue to make a difference where it matters most.
“Although grateful for the Government’s support in helping us meet rising costs, we now need a stable, long-term approach that allows leaders to plan ahead with certainty. We can’t achieve our mission on shifting foundations.”
A Department for Education spokesperson said: “We understand the pressures that schools and academy trusts are facing at the moment due to the challenges of recession and high inflation, which is why we are investing an extra £2 billion into our schools next year and the year after.
“The financial health of the academies sector is, in general, strong with many trusts well placed to respond to the current challenges. Where trusts are facing significant financial difficulty, we will take appropriate action to support them.”
The new accounts published by MATs are for the year ending in August 2022.
In last year’s autumn statement chancellor Jeremy Hunt revealed that the government will invest an extra £2.3 billion per year in schools over the next two years.
