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.
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 had raised Norfolk County Council’s licensed deficits policy, which saw 12 schools allowed a collective deficit of £173,530 at April 2016.
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”.
'This creates reasons for academisation'
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.”
Asked whether licensed deficits were likely to be discontinued in other parts of the country, Short Stay School for Norfolk executive headteacher Des Reynolds, who sits on the forum, said: “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.”
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”.
A DfE spokesperson said: “Our guidance remains that local authorities are able to have a licensed deficit arrangement with their schools if they choose, but these should be for no more than three years.”
This is an edited article from the 24 February edition of TES. Subscribers can read the full article here. This week's TES magazine is available in all good newsagents. To download the digital edition, Android users can click here and iOS users can click here