School finances: Taking the longer view

Written by: Colin McLean | Published:
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With schools feeling the financial strain, now is the time to take a longer-term view of financial planning, says Colin McLean

School budgets are feeling the strain today because of a perfect storm of financial pressures.

National Insurance and pension increases are among the factors to blame, in combination with funding that isn’t increasing in line with these cost pressures and inflation in general.

There’s also the new proposed National Funding Formula which will see some schools lose out and others gain – but potentially not gain enough to cover their increasing costs.

Rising pupil numbers might eventually balance the books for most schools but to steer the ship through these choppy seas, school leaders need to take a much more strategic, longer term view of their finances.

Too many schools and trusts still take a year-by-year approach, says Susan Fielden, a school finance expert. She explained: “Traditional school budgeting is based on an annual cycle. Schools have been used to getting a statement of how much they would be funded for the coming year and they would plan on that basis.

“But we’re in a much more pressurised – and complex – environment today. Many schools have become academies and many belong to a multi-academy trust (MAT). The old approach of year-to-year budgeting is not going to provide enough lead time to manage these budget pressures or achieve the planning required if you want to grow that trust.

“The Regional Schools Commissioner, for example, will want to see a three to five-year plan in place that will detail how that growth is going to be achieved and funded.”

So how can you adopt a more strategic, longer term approach to financial management? Ms Fielden has some advice...

Don’t put your head in the sand

“The first and most important action is to be very clear that funding will not increase as fast as cost pressures over the coming years. The public sector has been under tight financial restraint for some time but schools have been protected. But that is changing. Being part of a trust might help you reduce some of the risks.

“There may be less financial pressure if you pool budget across a group of schools. You could potentially develop effective leadership for a subject across the trust rather than have this subject leadership in every school, for example.

“But remember that it may be very difficult to maintain every facet of your school’s individuality if you go down this route: you won’t get the efficiency savings of being part of a larger organisation of schools without some degree of centralisation.”

Be visionary

“I’m a firm believer in connecting your strategic financial planning to your overall strategic plan, underpinned by a vision that sets the direction you want to take. If you don’t have that then you won’t have a clear path to follow towards your ambitions and you will be more easily knocked off course by short-term balancing of the budget. Remember that funding big changes takes time and can’t be covered within an annual budget cycle.

“If you decided to change from a three to a two-year GCSE programme, or reduce option choices, for example, it will take time for this change to work its way through. Restructuring teaching and learning responsibility payments for staff also takes up to three years. If you look one year ahead you will never do these things.”

Understand the local context

“Some schools still take quite a simplistic view about pupil number projections. It might be as superficial as ‘I’ve read in the local press that there’s a new housing estate being built in the area’.

“You need to have a well-evidenced plan with a clear picture of how many pupils are coming along and understand what is driving this. If you are part of a growing MAT your access to local knowledge and data could be better than that of a traditional local authority.

“If you are a geographical MAT your schools could really know their community and get into it in a much more thorough way than the local authority that was operating over a much wider area.”

Identify your red lines

“Identifying what is really important to you as a school or trust in terms of your education offer is a really important element for any strategy. What are the fundamentals that are driving you?

“It might be emphasis on learning through music or the balance of timetable time given to science in the curriculum. What are your red lines about mixed year groups?

“These questions need to be asked as you consider your plan. If you have the fundamentals right you can start structuring a strategic plan.”

Plan together

“The business director should put together a three to five-year projection that includes a reasonable set of assumptions based on cost pressures. The headteacher and leadership team need to be clear about their teaching and learning ambitions and what the practical delivery will look like in terms of class structures, timetables and the like.

“The important thing is to work together to bring those two things into balance. It won’t fit at first, there will almost inevitably be a gap between ambitions and what is affordable.

“For senior leaders who have not attempted strategic planning before, they need to drill down and understand financial projections, while business heads need to understand education plans.

“It might be wise to consider some external advice on the numbers and it is always a good idea to visit other schools to see what they have done.”

  • Colin McLean is chief executive of Best Practice Network, a national provider of professional development, training and school improvement support. Visit


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