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Big boosts but inaccessible income streams: How COVID-19 closures have impacted academy funding

| Rachel Barrett | 26 November 2021

After more than a year of exceptional challenges for the education sector and emphatic promises from the Government highlighted in headlines nationwide, many academies are still scrambling to make sense of their finances.

With so many novel income streams born of the pandemic and so many cogs twisting in tandem, how can school leaders be sure of their income for this academic year?

While we can’t yet know what the financial outturn for the most recent school year will be, we can look at the lessons we’ve learned since March 2020, observe key trends in the data and factor in anticipated commitments from the Government to forecast funding for 21/22 as reliably as possible...

Balancing support across the sector with unavailable ancillary income

Each year, Duncan & Toplis co-authors a major report into the finances of nearly 1,400 academy schools in 300 academy trusts across the UK. The ‘Kreston Academies Benchmarking Report’ represents the finances of 15% of all academy schools in the UK, making it one of the largest surveys of its kind.

With academies accounting for 35% of all state-funded schools in the UK, this report provides an essential insight into an element of the education sector that is normally excluded from official government and local authority data.

With £560m of capital funding announced by the government in June 2020 (£315m of which was for the Academy sector) and a further £1bn COVID catch-up package promised in July 2020, you would be forgiven for expecting a year of surpluses across the sector. However, when we drill down into the details, we see that the truth isn’t quite so clear-cut.

Even accounting for the sweeping government support across the sector, pre-promised assertions of a £426m commitment to the Teachers’ Pay Grant (TPG) fund for 19/20 and a fully-funded rise in pension contributions via the Teachers’ Pension Employer Contribution Grant (TPECG), we can’t ignore the rule of averages. 

Yes, it is true that many education settings were able to (and indeed had to) capitalise on the immediate disruption caused by COVID-19 to slash overall expenditure from expenses, such as reduced property costs, fewer maintenance costs, lower energy and utility bills, and fewer educational supplies - but what was unclear until recently was just how much this would impact academies’ ability to generate ancillary income.

COVID had the unexpected effect of meaning that many MATs, as well as some secondary schools, were unable to generate income which would usually be classified as ‘other income’ in financial statements. This includes income that could have been gained from the hiring of premises and income from sports facilities.

This is particularly imperative when we consider that, historically, MATs have generated the most ‘other’ income of all trusts  - resulting in a steep loss during the first part of the pandemic. On the other hand, not all of the averages align quite so cleanly, as we will explore.

Unreliable averages: total income per pupil 

Given the above, it might surprise you to learn that for the 2019/20 academic year, MATs enjoyed a significant increase in the total income per pupil, with the highest funding level in at least five years, at an average of £7532 for 2020; £547 more than pre-pandemic levels. 

Meanwhile, primaries saw a small increase, from £5,086 in 2019 to £5,176 last year. Conversely, income for secondaries decreased from £6719 in 2019 to £6662 in 2020.

Of course, we must remember that the noticeable increase in funding for MATs is driven, at least in part, by extra capital funding and through special schools joining their ranks. 

A glance at the figures does show that other ESFA/DfE income has been considerably bolstered by the TPG and the TPECG - but these must be discounted from income which applies to ensuring education, as they have the sole benefit of funding the increases in costs of pay and pensions for your understandably stressed teachers.

With GAG, FSM and capital funding all in fluctuation, Rishi Sunak’s pledge in October’s budget to “return funding to 2010 levels” will hopefully take the strain from many schools, with an extra £4.7 billion to be made available by 2024/5. Unfortunately, we may have to wait and see how this funding is allocated, or if it does indeed materialise. 

Worryingly, with inflation currently over double the Bank of England’s target rate of 2% - hitting a 10-year high at 4.2% CPI as a result of COVID - and energy costs rising by 12% in the last month or so alone, costs are climbing ever higher and impacting academies across the country.

The facts are clear: with everyone fraught over their finances trying to balance their books against the weight of the pandemic and all its incumbent challenges, Sunak’s “ambitious plans” are certainly welcome - and urgently needed. 

Click here to download the Kreston Academies Benchmark Report 2021

Or click here to find out more about Duncan & Toplis’ services for academies

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