A county council has banned its schools from setting deficit budgets after the government suggested that they were putting off potential academy sponsors.
It is believed that the change of policy in Norfolk could be repeated elsewhere, as financial pressures increase and ministers remain committed to all schools becoming academies.
Local authorities can allow maintained schools to plan for deficit budgets, which are usually funded through the collective surplus of their other maintained schools.
Insufficient resources
However, when schools with deficits choose to join an academy trust, the Department for Education has to pay off the deficit, and is later reimbursed by the trust. If the school is forced to convert, the council has to pay the deficit.
It has emerged that the DfE has raised Norfolk County Council’s licensed deficits policy, which saw 12 schools allowed a collective deficit of £173,530 at April 2016.
The number with deficits is projected to fall to seven in March 2017, but their total deficit is expected to more than double to £375,105, including £244,076 at a single secondary school.
According to papers from last month’s Norfolk Schools Forum, regional schools commissioner Tim Coulson told the council that he was “concerned that an increasing number of trusts do not have sufficient resources within their reserves to support schools that might have deficit budgets”.
Following the meeting with Dr Coulson, the council stopped accepting further licensed deficit budget plans “with immediate effect”.
Any school expecting to end the next financial year in deficit will now have to break even by the end of March 2018.
Valentine Mulholland, head of policy at the NAHT headteachers’ union, said: “I’m concerned that this does look like it’s come from the regional schools commissioner, so that it is partly motivated to create financial reasons for schools to consider academisation that might not have otherwise, and also clears any academisation barriers.”
‘Untouchable’ schools
The news comes amid mounting concerns about so-called “untouchable” schools, whose troubles mean that risk-averse academy trusts are reluctant to sponsor them, and a tightening funding squeeze across the school system.
Last month, a NAHT survey suggested that 18 per cent of schools were in deficit this year, compared with 8 per cent the previous year.
Short Stay School for Norfolk executive headteacher Des Reynolds, who sits on the forum, said that banning licensed deficits at short notice could be damaging for schools.
He told TES: “Whenever in education you make short-term decisions and move the goalposts midway through an academic year, it causes incredible difficulties for school leaders who have got to change entire spending plans. That might have an impact on curriculum planning or staffing.”
Asked whether licensed deficits were likely to be discontinued in other parts of the country, he added: “I don’t think anyone is going to announce this as official policy, but there’s an inevitability about it when the desired outcome is that all schools should become academies.”
The schools forum papers also said that, as more schools become academies, there would be fewer maintained schools with surpluses that could be used to fund licensed deficits at other schools, and “there will become a time that the local authority will not be able to support deficits in any school”.
A spokesman for Norfolk County Council said that it would work with affected schools “to create a recovery plan and continue to support them to ensure that they do recover quickly from the deficit”.
Recently, Essex County Council revised its scheme for financing schools, replacing licenced deficits with loan schemes to prevent it from having to pay off the deficits of schools that are forced to become academies.
A spokesman added that “many local authorities” had made a similar change.
The Department for Education were contacted for comment.
