The millions of pounds the government spends on writing off academy debt each year could go “up and up and up” as schools face increasing financial pressures and academisation targets, experts and leaders have warned.
Money that an academy owes to the government is sometimes waived to allow it to transfer to another trust, a process known as rebrokerage. The total cost of this to the public purse has risen every year since 2017, when it was just £2 million, to a peak of over £9 million in 2020-21.
Now sector leaders warn that these debt write-offs will likely become more frequent as more schools are “plunged into the red” as a result of increasing financial pressures, and as the Department for Education pushes forward with its drive for every school to become part of a multi-academy trust by 2030.
But this type of spending intervention only “papers over the cracks” of the financial problems that schools face, a heads’ leader warned.
And money used to finance the rebrokerage “may be better” spent across the school system more generally rather than going on individual waivers on a “one-by-one basis behind closed doors”, a govenors’ leader told Tes.
The DfE writing off academy debts
But the DfE said that waiving debt balances was a “last resort” option that was taken in a “very small” number of cases.
The Education and Skills Funding Agency (ESFA) publishes the biggest debt waivers each year in its annual report, though smaller figures are not generally included.
The overall numbers for the past four years, obtained after a freedom of information (FOI) request and analysed by Tes, show that the amount of funding waived to facilitate rebrokerage has increased from just over £2 million in 2017-18 to £9.4 million in 2020-21.
Earlier this year the DfE announced plans for all schools to be in or moving towards multi-academy trusts by 2030.
Meanwhile, economists have warned that budget pressures on schools will be “problematic” in future years as leaders face having to pay for unfunded salary rises and deal with inflationary pressures - such as high energy costs.
Geoff Barton, general secretary of the Association of School and College Leaders, warned that it was “very likely that the ESFA will have to waive balances owed by academies much more often if the government presses ahead with full academisation and every school in a multi-academy trust”.
He said that MATs were “simply not in a position” to take on the costs involved in repaying debt sums to the ESFA and this would “obviously be a barrier to the policy intention”.
He also warned that more schools would “be plunged into the red” because costs were “rising sharply and the government is not providing enough money to cover these costs”.
He added that ESFA interventions such as debt waiving were “just a case of papering over the cracks”, and that “the underlying issue is that the system needs to be better funded in general”.
Emma Knights, chief executive of the National Governance Association, said that, as trusts face financial pressures, they ”may have to draw the line at taking on a school whose finances risk dragging other schools into financial difficulties”, and that the number of waivers could go “up and up and up”, depending on the criteria the government uses to deploy them.
“The approach to debt and the waiving of that debt needs to be fair and equitable across the whole system and open to scrutiny. After all, openness is one of the Nolan Principles of Public Life”, she added.
“Discussions about finances have to be had in a bigger fashion, and can’t just be something that happen on a one-by-one basis behind closed doors. The money may be better spent elsewhere in the school system earlier, rather than going on individual waivers.”
The DfE does not have a strict formula for whether it writes off additional support funding or not, and has said each decision is considered on a case-by-case basis, with the aim of protecting pupils’ and taxpayers’ interests.
Reza Schwitzer, associate director of education practice at policy consultancy Public First, said that as the DfE pursued full academisation, there would be “increased scrutiny” of whether the policy relied “on much greater financial support from government to work, to the tune of millions of pounds a year” and whether the model was “genuinely superior in driving up standards”.
James Bowen, director of policy for school leaders’ union the NAHT, said: “The fact that the government is having to increasingly write off the debt of schools reflects the worsening state of funding, and it wouldn’t be a surprise to see this trend continue, given the growing pressures on school budgets.
“It is essential that all schools are given the financial support they desperately need to avoid more going into a deficit position.”
A DfE spokesperson said: “We are supporting schools with £53.8 billion in core funding this year, and the latest published data shows that 97.4 per cent of academy trusts and 91.6 per cent of maintained schools have balanced accounts.
“Waiving debt balances is a last resort taken in a very small number of cases to make sure a school can transfer to another multi-academy trust where that is required to protect pupils’ interests.”
