State school annual deficits on course to double

The TES is reporting exclusive new research that, they claim, suggests state school debt is on course to more than double in just two years.

TES asked local authorities in England and Wales how much money maintained schools had asked to borrow from them to cover their budget deficits in each of the past three years.

Results came in from more than three-quarters of the councils – 137 of the 174 – and the numbers paint a worrying picture. The total amount they gave schools permission to borrow rose from £35.8 million to £51.7 million between the 2013-14 and 2014-15 financial years.

In November, the total for 2015-16 already stood at £56.7 million, with nearly half the financial year to go.

The figures, obtained under the Freedom of Information Act, also reveal that the average permitted deficit per school is now £122,828, approaching double the £66,580 figure from 2013-14.

“The cost pressures on schools are really biting,” said Malcolm Trobe, deputy general secretary of the Association of School and College Leaders union…

See more on this in today’s edition of TES

More at: State school debt on course to double

 

I’m not an accountant by my understanding of deficit is that it is the additional debt an institution incurs over a single year, rather than the total debt (which is the sum of all deficits and surpluses).

The article seems to use debt and deficit as the same thing but is actually talking about deficits, not overall debt. It would be very interesting to also know what the total debt/surplus levels are.

For example, a school running a deficit of £122k (the average permitted amount reported above) could run up a total debt of half a million pounds if it borrowed at this level for just 4 years. However, this is an average figure that covers small primaries and large secondaries, so no doubt the levels at the higher end are considerably greater.

How significant are these figures compared to overall budgets and what do you think the extra borrowing is being used for?

Also, these are figures for maintained schools, how would you see things for academies?

Please give us your insights and opinions in the comments or via Twitter…

 

State school annual deficits set to double - cause for concern?

 

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Comments

  1. Julie_Cordiner

    I haven’t read the full TES article but would agree the summary is confusing – and I am an accountant with a lot of experience in school funding! LA schools are not allowed to borrow externally, but they do have to carry forward deficits (just as they do surpluses).
    A deficit may therefore be one year’s overspend or the accumulation of several years of overspending. It isn’t usually classified as debt; the LA holds aggregated balances and can’t refuse to ‘cover’ a school’s deficit. I’m assuming the FOI asked for information on schools in deficit and the ‘borrowing’ reference is a red herring. Ongoing deficits need to be tackled.
    It is possible for an LA to run a loans scheme where a school wants to do a capital project but hasn’t enough devolved capital grant or surplus balances to contribute. But that is a different matter.

  2. andylutwyche

    SchoolsImprove Increased costs & decreasing income shouldn’t even work in Narnia where George Osbourne & the rest of govt seem to reside

  3. amirshah316

    SchoolsImprove this was the biggest concern when the Academisation and marketisation of schools was raised. Cost cutting over education.

Let us know what you think...