The pressing reality facing many heads, four years into LMS, is that once last year’s spending commitments have been rolled over to the new financial year and uprated for inflation and pay rises, there is no margin left. Not a small one, but none at all. Even worse, there may be insufficient funds to pay the school’s bills. Around the country, growing numbers of schools are quietly being forced to set deficit budgets. Many are only being kept solvent by drawing upon such accumulated surpluses accruing from the first two years of LMS when schools cautiously managed the transition from historical to formula funding.

Those surpluses have, of course, been easy to misrepresent and difficult to deal with politically. The Audit Commission properly issued guidance on them, because in the early days of LMS they were running at up to 10 per cent of budget in some secondary schools. Officers have complained to heads that county councillors can’t ignore apparently unspent money when setting their education budgets, and primary schools coming later into LMS have found in the surpluses apparent evidence that secondary schools were comparatively over-funded.

As is now apparent to those heads who still have them, the accumulated surpluses are all that protect schools from draconian book balancing like compulsory redundancy, even where they have rising rolls. For those schools which have now absorbed their surpluses, the budgetary future is an even bleaker one. I suspect that in the next three years, many secondary schools will find themselves in this position.

It is the head and the staff who have the enormous and stressful responsibility of making the budget balance, year on year. All the sympathetic support from LMS officers and others can’t disguise the hard reality that the buck stops with the school. This has come as a culture shock to some colleagues who remember the golden days when someone with deep pockets from area or county hall could find a solution to most problems.

So what can be done by the head struggling to balance the books? With the fragmentation of the national education service, it is far harder for any head to obtain a clear budget context for their school. Whether local authority or grant maintained, schools are increasingly self-managing. As a result, the year-on-year budget information lies in the computer networks of thousands of separate schools, and not centrally. Indeed, county treasurers are increasingly unable or unwilling to make sense of what is happening within their authority. So they carry on producing lists of schools by income and accumulated surplus since 1990, and ignoring income against expenditure per financial year.

So where does the headteacher begin? It has to be on the expenditure rather than the income side of the school budget, because that is where the most realistic scope for action lies. The euphoria of huge growth in lettings income which characterised early LMS thinking has long since disappeared in the reality of public liability and premises costs. But what scope for action exists within expenditure budgets? Most heads inherit a more or less stable pattern of expenditure, dominated by salary and wage costs. Yet unless that pattern can be re-examined and altered in some way, the annual budget planning cycle becomes little more than a dispiriting process of rolling over existing spending against predicted income and worrying about the gap.

A head can begin asking whether the annual school expenditure on, say, electricity or water or buildings maintenance is reasonable. After all, even though 80 per cent of school spending is on staffing, overall budget margins are so tight that finding savings in the 20 per cent non-staff costs can make the difference between creating a contingency fund and not having one at all. But where do you look for assistance? Not to LEA property services departments, in my experience. What about capitation or equipment spending, then? Not to subject inspectors or advisers.

If it is hard with non-staffing costs, where does the head turn to work out whether the school is spending enough or too much on teachers or clerical assistants or supply staff? There are analyses of curriculum, class size, contact ratios and bonuses deployed to get a feel of where the staffing is going. There are activity-led staffing models in some LEAs. There are staff absence analyses of the kind required by private companies offering supply insurance. There is the Audit Commission Adding Up the Sums set of tables showing aspects of staffing by school size. But at the end of all that reading, the head is left little further forward as far as his or her own school budget is concerned.

What all heads and governing bodies need to know is how their school’s particular pattern of expenditure compares with other schools of a similar size and type. Not because there is any science of spending against institutional characteristics, but because inter-school comparison is the closest we have to a living, realistic context for our budget planning. As head of an 11-18 comprehensive of 1,600 pupils, I know that my Pounds 3.4 million annual budget contains any number of spending headings worth examining. If I could discover, for example, that my electricity and gas consumption is broadly comparable to half a dozen other similar schools, but that my water usage is double, then I might have found something worth spending time on. Similarly, if my school is spending 30 per cent less on furniture annually than all the others in the sample, then some might want to pursue whether they have scope for savings.

Most heads have come into their posts with little or no training in facilities management, let alone budgetary planning. Indeed, there are some who make that a point of professional virtue, because they reject the apparently changed role for the head brought about by LMS. But such a stance is no defence, nor comfort to hard pressed staff, in the school struggling to balance its books. With 85 per cent or more of the schools’ budget delegated, there is no future in heads looking to County Hall for the answer, either. Very few inspectors and, even fewer officers have practical experience of managing schools with delegated budgets. Any answers lie in the painfully learned expertise of colleagues in schools around the country.

I believe that inter-school information exchange is the realistic and professional way forward for heads seeking to grapple with their budgets.

It will not be easy, though. If the curriculum and public exam results were the secret gardens of the 1970s and 1980s, school spending is the new knowledge to be coy about. With open enrolment and league tables, and ever greater diversity of practice, schools are understandably sensitive about others knowing how and what they spend, despite the requirement to put some bland budget figures in the governors’ annual report. Some ground rules need establishing, covering confidentiality and the use of comparative data.

Across the North of England, a group of heads of five similarly sized 11-18 comprehensives has begun such a process. On a mutually agreed basis, we have exchanged detailed information about our expenditure, our staffing and curriculum patterns and much else. We have also embarked on a series of meetings to discuss and examine the data, so we can make sense of our individual budgets, as well as gaining understanding of expenditure patterns in big schools.

A language for inter-school comparison has been necessary. The problem with knowing that my school spends Pounds 30,000 annually on electricity is knowing what to make of yours spending only Pounds 24,000, particularly when your budget is larger. It has been agreed by the heads involved that a question borrowed from commerce is helpful: what does each pound of budget spending buy?

The table on page 6 shows a budget comparison for the schools involved, published with their consent. Any school could produce a similar analysis of its spending. The figures are instructive, and the data has proved to be a catalyst for generating ideas.

While it is early days, some issues have already arisen which can potentially be fed into individual budgets. Discussion of comparative premises spending reveals that significant savings can be achieved by, for example, reducing the bore of the school’s main water supply pipe, independently metering kitchen energy consumption by school meals contractors, separately negotiating waste collection and in term-time painting contracts or by buying office furniture from surplus suppliers rather than county purchasing. Such savings at the margins can help balance a previously deficit budget, or fund part of a buildings development programme. They may help to facilitate the differences in departmental capitation apparent between the schools (C (3.14p) and D (6. 1p), for example) in the table. They also represent more effective use of resources.

Some other inter-school comparisons have been instructive. School C retains paper towels in manually filled dispensers in its pupil toilets; the remaining schools appear to be gaining by their investment in warm air dryers, with less scope for vandalism.

Expenditure on furniture needs further work, to identify what proportion goes on replacement as distinct from new items - can a higher level of wear and tear explain why school A spent over three times as much as school D (0.68p and 0.2p respectively)? A related question has arisen: how much provision should be made daily, weekly or termly for replacement of standard quality classroom chairs and tables in a busy school? Preliminary data suggests that l0 per cent of total stock, per year, is realistic. In terms of planned premises maintenance, the same two schools represent the extremes of expenditure. Why? The pragmatic answer appears to be that in schools (like LEAs) the maintenance budget is the last to be allocated and the first to be cut.

School C bought four times more equipment than school A; does that reflect a lower base of provision (for example, the ratio of pupils to keyboards) or its conviction that the same funds in leasing buy more year on year than capital purchase or hire? In addition, while funding for rates reflects differences in Community Charge levels beyond the control of the school, and go straight in and out of individual budgets anyway, the same cannot be said of cleaning (see A (1.74p) and E (2.32p)), or grounds maintenance (D (0.3p) and B (0.7p)).

Some re-examination of the basis of a multi-site county contract can cause a school to conclude that it would be better off setting up the contracts independently. Finally, as all the schools are single site, why do staff in school A have travel funded at five times the level of school E, and why do governors in school E have as much at their discretion as school D spends in total on electricity, gas, grounds and planned maintenance?

It is impossible, of course, to compare expenditure without considering staffing costs - the spending on teacher salaries of schools A (73.85p) and B(70.1p) in the table is worth comparing, particularly since school B also achieves a lower contact ratio! There are a number of explanations, including the averageactual salary problem, though that causes other effects on budget planning. Schools with a higher percentage of teachers at the top of the Standard Scale tend to gain financially on replacement of teaching staff, whereas schools with a lower percentage face more incremental drift over time and gain less on recruitment. In an average year a Pounds 5,000 to Pounds 10,000 gain or loss can arise quite incidentally through the appointment process. That’s a lot of money as a percentage of my energy costs, but not on a Pounds 2.6 million salary bill.

What other staffing issues get overlooked? Despite it being early days, it is clear that within the group, similarly sized and staffed schools have evolved different patterns of staffing expenditure. The relative size of senior management teams and the distribution of responsibility points, for example. Equally, the interface between teaching and support staff is turning out to be an area worthy of close examination. Are teachers in some schools undertaking clerical tasks which are done elsewhere by lower paid grades of staff?

There are other questions worth asking. Are liaison meetings with contractors tied to the free periods of a deputy head? Is a senior member of staff regularly late to their lesson, or called from it, when a non-teacher could be available to deal with a routine matter? Do highly paid senior teachers use part of their lower contact ratio on routine clerical or administrative work? Does the library have to be run by an English teacher with a time allowance, or would a chartered librarian be more cost-effective and available? What are the real costs of releasing teachers for the Social Services model of case conferences during the teaching day? Should a senior management team be composed of teaching staff only?

There are, of course, no easy or common answers to such questions. However, headteachers have increasingly to ask them as they seek to balance budgets and ensure that their pupils get the greatest benefit from available resources. once radical questions are asked, opportunities can arise to make changes which represent school improvement and are also cost-effective in expenditure terms. It is no coincidence that a number of large schools throughout the country are looking over time to “down-size” senior teams, flatten hierarchies and delegate increased roles to specialist non-teachers.

Such strategies are not an assault on the professionalism of teachers, though they can be represented as such. Rather, they are methods of ensuring that the school is pragmatically utilising its most expensive resources most effectively; in the process, as with reviewing non staff expenditure, every budget Pounds 1 is spent as wisely as possible. There really is no other professional way for heads to manage their school budgets. Yet they cannot do that in isolation, and for the reasons outlined in this article there is precious little data held centrally which can act as a practical context for their thinking.

Curriculum information exchange, often with the LEA as broker, was well established in the 1980s. Management information exchange with other similar schools, brokered between heads on an agreed basis, could provide a similar level of insight, support and understanding in these fragmented times. It could also feed most effectively into the national debate about the general under-funding of school budgets.

Kevin McAleese is head of Harrogate Grammar School, Arthur’s Avenue, Harrogate, North Yorkshire, and would like to hear from secondary headteachers in other parts of the country who would be interested in developing this idea.

The TES would like to hear from primary schoools interested in a similar information exhange. write to Bob Doe, The TES, Admiral House, 66-68 East Smithfield, London E1 9XY.