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Uncapping the cash

In its most lacklustre report so far, the School Teachers' Review Body agrees with the Chancellor on pay issues such as affordability and cash balances sloshing around in school coffers. Parents and governors, however, empowered by Government, now know at first hand the state of school reserves, and what it means for class sizes if teachers have to go. County halls are besieged, and protest meetings multiply through the green and pleasant countryside. The middle classes have never been so angry about education.

Where will it all end? Will it peter out in frustration until next year's budgets promise worse, or could parents take a tip from the French and march en masse down Whitehall? Have the governors got a good case and is there anything that the Government could do to meet them halfway?

The first issue to be disposed of is reserves: their size, incidence and virtues. Local education authorities have long played a game of bluff with the Government, which has now been called. Very few have hidden bags of gold left to pull out when protestations fail; many have reserves barely adequate to meet contingencies; some could arguably do more to help schools meet the salary bill, but will prudently hold back to prepare for public spending cuts already promised for next year and the year after.

That sort of prudence is only approved by the Government when it is found in grant-maintained schools, though the Permanent Secretary at the Department for Education had a notably difficult time defending the extravagant size of GM cash balances before the Public Accounts Committee this week. As to the LEA schools, what they have put away on average is again only what might be thought prudent to meet major expenses or a rainy day. Yes, the rainy day is here but they too know that the next two years of cuts promise fiercer storms. And who can blame governors for fearing, on past form, that budgets might be slashed mid-year?

The critical factor, however, is that in these days of local management school balances vary widely, and that though some (see page l0) are holding on to more cash than necessary and others simply what is sensible, some have next to nothing in the kitty. What other schools save is no use to them. It may be high average salaries, or falling local population which have made it hard to build reserves, both factors more likely in rural areas with low staff turnover, which may well be why the loudest protests are coming from the counties, from governors traumatised by having to sack staff for the first time, or contemplate classes of more than 40 for their own children.

These are the schools which will be unable to avoid shedding staff this year, whether through redundancies, non-renewal of short-term contracts, or early retirements. Those in the middle group will face some of the same medicine, while even those hanging on to what is regarded as excessive reserves may be unable to get through another two years of pressure without feeling the pain.

Given the prevalence of short-term and part-time contracts, a change in the profile of the teaching force noted in the review body's report, the final number of redundancies may be blurred. But Ministers should beware of thinking that the problem has gone away if fewer redundancies than threatened occur, since everyone knows now that next year will be worse.

The key question now is not just how long the Government can face down the combined angry forces of parents, governors, teachers and its own backbenchers, but what can be done to reach a compromise.

Since it is politically impossible for the Treasury to change its mind on funding the 2.7 pay award, and practically impossible to put a higher standard spending allowance for the local education authorities through Parliament at this juncture, attention is now turning more seriously to capping. The system which allows central Government to cap what local government can spend or raise locally is now seen by many as the real villain of this year's impossible financial equation, Even DFE officials now believe that they would have been better to attack the Treasury on that front than on SSAs last autumn.

The beleaguered counties have been pointing this out for some time, since the effect of capping has been to prevent them raising money through the council tax which they believe local residents would willingly pay to keep class sizes down (and might even vote in favour of the move, given the chance). Most LEAs have realistically asked simply for their spending caps to be eased. If Warwickshire, for example, were allowed to spend Pounds 2 million over its cap (roughly 1 per cent rather than 0.5), with the proviso that the money went into the aggregated schools budget,that would only add 23p a week, or Pounds l2 a year to the council tax, but could save 100 teachers' jobs and make a significant difference to governors' problems.

That would make an effective cause for governors up and down the country to rally round, especially at a time of growing uncertainty about the value of mass resignations or illegal budgets. And it would certainly strengthen the hand of back-bench Conservative James Pawsey, one of Warwickshire's MPs, who is now leading a battle to go one democratic step further, and get spending caps removed altogether.

Not always a natural ally of LEAs, Jim Pawsey does have a shrewd eye for parental concerns, especially when they fill back-bench mail-bags. Either removing or relaxing capping at this stage could be messy, but both Ministers and governors could do worse than look for a solution on those lines.

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