Pupils’ education could suffer as schools are forced to find £3 billion of savings by 2019-20 amid soaring costs and real-terms funding cuts, the National Audit Office has warned.

Schools have “not seen this level of reduction in spending power since the mid-1990s”, according to the spending watchdog’s report published today, Financial Sustainability of Schools.

The NAO found that the Department for Education is not increasing schools’ funding per pupil in line with inflation, meaning it will only rise from £5,447 in 2015-16 to £5,519 in 2019-20.

At the same time, the DfE expects schools to find £3 billion of savings to counteract rising costs fuelled by pay rises, the introduction of the national living wage, higher contributions to national insurance and the teachers’ pension scheme, and the apprenticeship levy.

The savings equate to an 8 per cent real-terms cut between 2014-15 and 2019-20, the report says.

However, these savings estimates do not take account of DfE policies such as the phasing out of the Education Services Grant, which will slash £615 million from the funds available to local authorities and academies to provide services to schools.

Workforce cuts

The DfE was unable to assure the NAO that the savings will be achievable, and has failed to clearly communicate to schools the scale and pace of savings that will be needed, the report says.

For example, although the 2015 spending review announced a target to save £1 billion a year through better procurement, it did not make it clear that the bulk of that amount was expected to come through workforce savings, according to the NAO.

In recent years, schools have reduced the proportion of their budgets that is spent on teaching staff, the report states.

It says: “As analysis indicates that schools tend to reduce the proportion of their spending on teaching staff before other areas of spending, the delay in providing support in this area increases the risk that schools will make poorly informed decisions that could have detrimental effects on educational outcomes.”

From 2009‑10 to 2013‑14, 70 per cent of maintained schools examined in a DfE analysis reduced the proportion of their spending that went on teaching staff, despite only 34 per cent experiencing a reduction in funding. The figures were unavailable for academies.

The report highlights uncertainty over how much funding schools can expect in future, although the government’s detailed proposals for the national funding formula are due to be announced later today.

Recommendations

The NAO urges the government to publish, as soon as possible, its own assessment of the financial challenges faced by schools between 2015-16 and 2019-20. It also says the DfE should provide clear leadership to schools and realistic timescales for cost savings.

The government also needs to work faster to clarify how schools will achieve the required savings, the report says.

“The DfE’s approach to managing the risks to schools’ financial sustainability cannot be judged to be effective or providing value for money until more progress is made”, the watchdog adds.

‘Wake-up call’

Russell Hobby, general secretary of the NAHT heads’ union, said the report was another “wake-up call for the government”.

“The NAO echoes what school leaders have been saying - schools’ budgets are being pushed beyond breaking point,” he said.

“Whilst school business managers are very adept at managing tight budgets, it is clear that schools cannot make these savings without reducing their biggest cost, which is staffing. To do this puts the quality of education at risk.”

Meg Hillier, chair of the Commons public accounts committee, criticised the DfE for focusing on structural reform instead of supporting schools.

She added: “I hope the Department for Education get their act together to understand and address a sector facing increasing financial challenges faster than the Department of Health have.”

A DfE spokeswoman said: “We want schools to have the resources they need, and through our careful management of the economy we have been able to protect the core schools budget in real terms.

“That means that in 2016-17 schools will have more funding than ever before for children’s education, totalling over £40 billion.

“We are introducing a national fair funding formula so schools are funded according to their pupils’ needs, rather than by their postcode. This will give headteachers certainty over their future budgets, helping them make long-term plans and secure further efficiencies.”

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