Encouraging academy debt will lead to financial scandal, unions warn

The TES is reporting union warnings that a government decision to encourage academies to take out loans for building work will add “fuel to the fire” of financial scandal…

The right for academies to borrow money was quietly revealed in the middle of a briefing published by the Department for Education during last week’s half-term holiday.

It will be introduced from April, according to the document, which notes that: “Academies are currently not permitted to take out loans without the permission of the secretary of state, which is rarely granted.”

In future, not only will academies and colleges be able to take out loans, for up to a maximum of 10 years, but the government will actively encourage them to do so, it explains.

The document says that those “choosing to take a loan will score higher” on the points system, used to decide whether they will receive money through the Condition Improvement Fund (CIF).

There is also encouragement to make the loans as big as possible. “A project funded 100 per cent through a loan will see a greater increase in score than a project funded 50 per cent through a loan and 50 per cent through a grant,” the briefing says.

Unions claim that the change could trigger further financial problems in academies and lead to schools running out of money as funding is squeezed and loan repayments are prioritised.

Christine Blower, general secretary of the NUT teaching union, said: “The accountability system for scrutiny of the accounting and financial arrangements of academies and free schools is dysfunctional, as evidenced by the numerous financial scandals that have occurred.

“Without proper oversight arrangements, encouraging academies to get into debt is potentially adding fuel to the fire.”

The DfE said the loans would be available only to academies with budget surpluses and clean financial bills of health.

But headteachers’ leaders are still concerned about the impact of loan repayments that have to be made through deductions from the main “revenue” funding the school or college receives from the government…

More at: Encouraging academy debt will lead to financial scandal, unions warn

 

The full article also makes interesting comparisons with the situation at FE colleges and, in particular, the VAT liability they face which has previously been justified partly on the basis of being able to borrow on the open market. Your thoughts on academies now being allowed – you might say encouraged – to take out loans? Please let us know in the comments or via Twitter…

 

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Categories: Academies and Further Education.

Comments

  1. andylutwyche

    SchoolsImprove Schools already struggling to make ends meet without loan repayments on top – this has disaster written all over it

  2. andylutwyche

    SchoolsImprove The time & manner of the release of this policy on the world is telling – politicians know it’s wrong so do stealth release

  3. Janet2

    Loans attract interest – cost more in the long run.  It’s a PFI-type scandal in the making.  And what happens if schools default?  Unlikely there’ll be closed so taxpayer will pick up the bill.

  4. Sam_Peepz

    SchoolsImprove Its better to invest in bricks & mortar than “qualified teachers” off the “Wet Behind The Ears” conveyor belt. #experience

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