How to cut millions of pounds without harming the chalk face

17th September 2010 at 01:00
Analysis OK, so there's a public spending crisis. But, as the Lib Dems prepare for their conference this weekend, John Howson argues that there are plenty of efficiencies to be made that won't damage front-line services

Does Mr Gove know there is a financial crisis? One of the problems facing ministers at the Department for Education is always that, although they are responsible for schools, they do not generally run them. This sometimes cripples the breadth of ministerial thinking. In the present situation, the Coalition's aim to fund both a pupil premium and protect front-line services in schools may also reduce any urgency to consider how efficiencies can be made across the whole schools system.

In addition, the law of unintended consequences always looms large when change is in the air. Mr Gove will need to visit the star chamber over the next few weeks to do battle with the Treasury over his Department funding. He needs to recognise that he will better protect his core budget for the next spending round if he can identify some areas where cutbacks are possible - and not just by axing the odd quango.

Indeed, savings can be made in education. If Mr Gove remembers the dictum used in Mrs Thatcher's famous 1979 Education Act passed during an earlier economic crisis) that change must not be "prejudicial to the efficient use of resources" he will not go far wrong.

The Liberal Democrats are using the phrase in a motion to their party conference that starts this weekend in Liverpool to question whether either academies or free schools are cost-effective in an age of austerity, regardless of any other objections to such schools.

But curtailing free schools and academies will not save much cash, especially if they are new schools based on the need to serve a growing population. There are bigger opportunities for governments looking for savings on education spending. Many revolve around the complex relationship between the state and private citizens, and their right to choose. So here are a few possible examples of big-ticket items suitable for review.

Independent sector pensions

The Teachers' Pension Scheme is largely unfunded, and where any shortfall between payments to pensioners and contributions from teachers exists it is made up by the taxpayer. Many private schools have been able to enrol their staff in the scheme, and more than 1,500 such schools make use of this concession.

This is a good idea if free movement of teachers between schools is to be encouraged. But the Government has no control over salaries paid in the private sector and less and less influence in parts of the state-funded sector, especially if there are more academies released from the school teachers pay and conditions document. There are reckoned to be more than 70,000 teachers working in the independent sector compared with around 500,000 in state schools and colleges. With the average teacher's pension now close to #163;12,000 per year and the number of teacher pensioners rising from 266,000 in 199899 to nearly 355,000 by 200809, something has to be done.

If just the top earners - say 100 heads each earning #163;100,000 - retired each year (a not improbable number across the independent and state sectors), this could create a pension pay cut of some #163;7 million per annum - #163;70 million over a decade. And this does not including their lump sum on retirement for this group alone.

It should be possible to ensure that the overall pension scheme is cash-neutral to the state in future and not a drain on the public purse. Indeed, should the scheme be open to non-state-funded schools other than on the basis of pension payments being balanced by receipts? In this day of sophisticated investment opportunities and portable pensions, surely the state does not need to provide a scheme for private schools at all?

Reform teacher training

The same issue of savings is pertinent to teacher training. At present, where a teacher decides to teach after qualifying is rightly their decision. However, training costs are largely borne by the Government, so those who train at the expense of the state and move to the private sector cost the taxpayer money.

Moving training for secondary teachers to a school-based system would cut the cost, potentially requiring state-funded schools to train only those teachers needed to staff their schools. Putting a break on all secondary training for a year might allow time to create a new cost-effective system and would save money into the bargain, especially when so many of this year's newly qualified teachers are struggling to find posts.

If a third of places were removed, this might save around #163;25 million a year. A one-year moratorium could save three times that amount and reduce the reservoir of unemployed teachers struggling to find work.

Sham redundancies

The Government must also consider the unintended consequences of a previous Conservative government's decision to devolve budgets to schools. There will be redundancies over the next few years, regardless of attempts to protect school funding. The pupil premium, if handled badly, might even exacerbate the situation if a collision with the funding model for academies creates losers as well as winners among schools.

With more than 400,000 teachers, and as many non-teaching staff, working in schools, a 1 per cent cut in staff would release 4,000 teachers. If just a quarter of these were the result of redundancies, that still amounts to 1,000 job losses. Schools will not release their cheapest teachers, so those who are made redundant are likely to be on the top of the upper pay spine, but with no teaching and learning responsibility (TLS) payments.

Teachers draw an annual salary of #163;36,000 to #163;43,000, depending on the location of their school. We must also assume 15 years of service and one week's pay for each year.

Even if only the statutory maximum redundancy pay of #163;380 per week is paid, that totals #163;6 million to #163;9 million for every 1,000 redundancies. Any negotiated settlement would make the figure much higher. If teachers were to receive a year's salary instead of basic redundancy payments, the saving through redeployment could be much, much higher. Wasting, say, #163;30 million on sham redundancies per year would be senseless.

Requiring every school to post staffing vacancies for a week on a website only available to those under threat of redundancy, and requiring all schools to decide their staffing needs by the end of April, would ensure that many teachers could be redeployed, and so save their redundancy pay. Not to do so means that every pound paid out in redundancy packages will have to be found from somewhere else. Of course, those starting training courses this autumn will be potential losers, but there has never been a guarantee of a job for them. Paying a bonus to a receiving school might provide a useful incentive to promote such a scheme.

Labour's flagships

Savings previously rejected as impractical or undesirable will be vital if the Education Secretary tackles the consequences of the imbalance between rising pupil numbers in primary schools and falling rolls in secondaries. To do so without appreciating the consequences risks wasting public money unnecessarily.

Indeed, just as Building Schools for the Future has been rethought, so too will some of the last government's other schemes. When the leaving age is increased to 18, will educational maintenance allowances still be needed or can the cash be used in other ways? And what of programmes such as Sure Start and the funding of after-school activities?

The first can be cut back to its original purpose in providing support for deprived communities and the second can be rolled up in the pupil premium funding with a saving of possibly as much as #163;2 billion across the various programmes.

#163;3bn legislation risk

The Tories run the same risks as Labour with their academies expansion. Allowing 11-16 schools to open sixth forms of uneconomic size and reducing the size of sixth forms in other schools and colleges is hardly a cash-saving programme.

All of these schemes must be considered as there will still be a need for significant new expenditure in their early years. However, the biggest threat to public expenditure in education at present would be if the Education Secretary created his free schools and academies in such a way that the courts could interpret the legislation as a charter for all fee-paying schools to receive state funding.

That would come with a bill of over #163;3 billion to the Exchequer and dwarf the potential savings. You have been warned, Mr Gove.

Professor John Howson is a consultant to Education Data Surveys, a sister company of The TES. He is also president of the Liberal Democrat Education Association. He writes here in a personal capacity.

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1922 remembered

Savage as today, the Geddes axe

Schools have been in the front line for cuts in previous periods of austerity. Harold Wilson famously postponed the raising of the school leaving age to 16 during the 1967 devaluation crisis, and also slashed the school-building programme.

But by far the best remembered and savage cutbacks to education spending came in 1922 under the Lloyd George coalition government with the wielding of the notorious "Geddes axe".

Teachers' salaries and the emerging secondary school sector featured largely in his suggestions for reductions in public expenditure. Class sizes in urban areas were expected to rise significantly to help reduce government spending.

Like the current debate about how many 18-year-olds should be allowed to go to university, Geddes saw spending money on educating more pupils beyond 11as a waste of public money. Mostly, only those who could afford to pay would receive anything other than elementary schooling beyond the age of 14.

The arguments about who would suffer, and the divisive effects on a society where wealth was as unequally divided as it is today, prompted RH Tawney, a key thinker on the left, to write: "The aim is to re-establish and perpetuate the organisation of education upon lines of class, which has been the tragedy of the English educational system, as of English society, since its inception, and from which it was just beginning to escape."

That remains the risk with the current approach to education spending cuts, despite Mr Gove's recent commitment that "schools should be the engines of social mobility".

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