Cost pressures on schools could increase next year, leaving them facing a new “impending financial crisis”, school business leaders have warned.
Schools could see costs rising by “around 7 per cent” next year due to the impact of pay increases and “lagged inflation”, Simon Oxenham, the Institute of School Business Leadership (ISBL) national lead on school finance and efficiency, said.
Speaking at the ISBL annual conference, Mr Oxenham, who is also director of resources at Southend High School for Boys, estimated that schools would need a funding increase of at least 12 per cent to cope with increased costs on top of existing pressures.
“Half the delegates in the room at ISBL put their hands up when I asked who would be running out of money next year,” Mr Oxenham told Tes after his speech to the annual gathering of school business leaders. “Increased cost pressures for next year are likely to be in the region of 7 per cent.”
He said the new “impending financial crisis that’s about to hit schools is growing to be a systematic problem we seem to be content to inflict on the next generation”.
The National Living Wage will go up in April 2024 by nearly 10 per cent and unions are assuming a similar pay increase for teachers as this year (6.5 per cent) in 2024, both of which will increase costs for schools.
School funding: ‘Impending financial crisis’
Mr Oxenham explained that despite inflation now starting to go down, schools will face higher costs into next year because of lagged inflation: school suppliers typically review prices annually based on how inflation has been throughout the majority of the year.
The Consumer Price Index (CPI) rate of inflation rose by 4.6 per cent in the year to October 2023. It was much higher at the beginning of 2023, having risen by 10.1 per cent in the 12 months to January.
The cost of the Department for Education’s flagship insurance scheme for schools, the Risk Protection Arrangement (RPA), is also increasing from £23 per pupil to £25 per pupil for 2024-25. Almost three-quarters of academies and around 15 per cent of schools are signed up to the RPA, according to the latest data.
In correspondence between the DfE and schools, seen by Tes, the increased cost of this insurance was said to reflect “recent increases in inflation and the cost of meeting claims”.
Also speaking at the ISBL conference, schools minister Baroness Barran said that the government had calculated that the average school will be able to deliver within its budget, and that many schools had seen a slight increase in their reserves.
However, the minister admitted that inflation had “eaten away” at some of the increases in funding from the government.
Teachers’ and school leaders’ unions were left disappointed by the lack of any commitments to increasing education funding in the Autumn Statement last week, after calling for an uplift of £1.7 billion a year for schools for 2024-25. They expect schools’ costs to increase by at least 5.8 per cent next year.
Budgets stagnating
The government has said schools now have £2.4 billion in additional annual funding since the 2021 Spending Review, as of the current academic year. It says this additional annual funding will rise to £2.8 billion by 2024-25.
Despite this, analysis by the Institute for Fiscal Studies shows that schools’ budgets are stagnating, with their costs growing at a similar rate as funding, and many academy trusts worried about their finances.
The IFS projected school costs growing by 7.2 per cent for 2023-24, and 3.7 per cent for 2024-25, though explained that the latter estimate assumed pay deals of 3 per cent, but these pay awards “might end up higher”.
Dr Robin Bevan, headteacher and CEO at Southend High School for Boys and an ISBL patron, said: “It’s extraordinary that we’ve got to this point. The piece that is missing in the system is any serious modelling by the funding policy unit of the actual expenditure in real schools that are in the most financially poor circumstances.
“I think ministers have no real concept of the extent to which schools are approaching bankruptcy and insolvency and a fiscal cliff because costs are rising far faster than income. And that perpetually declaring that you are putting more money than ever into schools is not helpful if it isn’t sufficient to actually cover staffing costs and the related expenditure that schools have.”
