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We will not stare deficit in the face

Headteachers with cashflow problems are reluctant to dip into their school's capital funds. Phil Revell reports

WAIT for the cavalry. That seems to be the Government's message to schools.

In the meantime, heads with cashflow problems have been given permission to dip into the piggy bank.

Heads have a choice. If they have reserves, they are expected to use them.

If not, then negotiations need to be started with the local authority about running a deficit budget. Heads with a capital programme may be able to use that money for revenue spending.

For John Darker the alternatives look equally uninviting. "I can't get over the lack of understanding of how school budgets work," he says.

Darker is head of the Beacon School in Surrey. His budget is pound;300,000 adrift, thanks to higher staffing costs and standards fund cuts of pound;210,000. The idea that he might be able to use capital funding leaves him temporarily speechless. "For a start it isn't enough," he says. Beacon has just pound;49,000 of capital money to call on, most of which is already committed.

"Capital spending contracts are agreed months in advance," he says. Most schools want building work to be done during the six weeks' holidays. Any head that left the booking process too late would be unable to find a decent contractor. And the money isn't reserved for the kind of artwork and atria to be found in government offices.

"A lot of this money is for essential health and safety work," says Darker.

He is also bemused by the sudden abandonment of the basic tenets of budgetary management.

"What about financial planning?" he asks. "If you follow this advice, you might as well tear up the development plan."

Surrey faces particular problems. Twenty-eight secondary schools carried over a deficit from the past financial year and Bob Linnel, who chairs the county's secondary heads' group, estimates that the majority of Surrey's 53 secondary heads will face a deficit this year.

Surrey is advising schools that licensed deficits are possible, but only after the school's governing body has agreed the need - and then with the LEA's approval. Deficits are normally used when schools face sudden cuts in income caused by falling rolls. The maximum period for an agreed deficit is five years, and the maximum allowed is 10 per cent of budget share.

The TES has been informed that Department for Education and Skills'

guidance to LEAs on the use of capital funds to support this year's revenue problems make it clear that schools may only tap into their capital after they have agreed a formal deficit.

John Darker will not go down that road. He has slashed his staffing, losing nine staff and an assistant head in the process. Next year's class sizes will be bigger and the school will close early on Friday afternoons.

"We can't start saving money until September," he says. "Which means that any savings are only for 712ths of the year."

In Manchester, Jean Else has threatened to quit rather than make her teachers redundant. The radical and successful head of Whalley Range rejects a deficit as a solution to her pound;600,000 shortfall.

"I can't use my reserves," she says. "It's not enough. And it's not an option to set a deficit budget. I'm not going to sit here with my fingers crossed hoping that the money will arrive."

In the Midlands, primary head Alan Stockley is also wary of running a deficit. "I wouldn't dare move into a deficit budget because I know how difficult it can be," he says. Stockley is head of the Landywood primary is Staffordshire. He will lose two teachers this year and his junior class sizes will increase in September.

"We need a 10 per cent increase in budget just to stand still," he says. He acknowledges the national picture of falling rolls in primaries that has exacerbated the problem for some primary heads. But there isn't a falling roll at Landywood, just a hole in the funding.

At a national level the Local Government Association believes that the problem is too big to be ignored. "We think that the right solution is to put more money into the base budget next year," says the LGA's education chair Graham Lane.

There are hints that the Government might return to more ring-fencing of the budget, especially to protect money attached to the workload agreement.

But heads like Alan Stockley and John Darker have to make their decisions now.

"If the Government were serious about running a deficit as a solution, they should be promising to write off approved deficits next year," Mr Stockley points out.

These heads have no confidence that ministers understand the scale of the problem. No head The TES spoke to was planning to run an approved deficit.

All were planning deep cuts in their budgets. There could be a long winter ahead.

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