Best Practice

School funding: How to set sustainable budgets

School finance Whole-school issues
Many schools face the task of maintaining high educational standards while managing falling budgets. Jackie Keegan advises on how schools might set a sustainable budget which still allows us to deliver great results in the classroom
Budget challenges: As many as one in seven maintained schools – some 15.3% – were in deficit at the end of the 2023/24 financial year, the highest proportion since 2015 - Adobe Stock

It is fair to say these are particularly challenging times for school leaders with many primary schools having to manage real-terms decreases in their budgets. For heads who have only known budgets to increase year-on-year, it is a steep learning curve.

A combination of factors is driving this fall, not least the declining birth rate.

The Office for National Statistics (ONS) suggests that the number of children (0-15 years) will shrink by 800,000 by 2032 (ONS, 2025).

Another analysis last year showed that the number of primary pupils has already begun to fall from its 4.73 million peak in 2018/19, with projections showing an average yearly decrease of 1.5% until numbers reach 4.06 million in 2028/29 (Cruikshanks, 2024).

At the same time, as you all know only too well, costs are rising in almost every area, squeezing available resources still further.

Latest government figures (DfE, 2024) show that as many as one in seven maintained schools – some 15.3% – were in deficit at the end of the 2023/24 financial year, the highest proportion since 2015.

So, what can school leaders do to create an effective budget that will help deliver a great education for every child while keeping finances out of the red?

 

Plan budgets carefully

Planning and preparation are key to ensuring every penny you spend delivers maximum educational impact.

Take some time to look over the year-end accounts for the previous year to understand areas of over and under-spend on different budget lines. Was your initial figure unrealistic, or were there mitigating circumstances to consider – for example, was there a significant overspend on maintenance costs due to a boiler breakdown? Is the issue fixed, or is it likely to happen again?

Experience tells us that there are three key areas where budgets frequently don’t align with actual spend:

  • Energy costs
  • Staffing
  • IT

Energy costs are unpredictable as they are weather dependent, and delivering best value for money relies on securing a good tariff. Set tariffs are generally procured through the local authority, but academies are free to shop around for a better deal.

Staffing budgets should account for 75% to 80% of your total revenue income and take into account classroom and admin support as well as teaching staff. Do you have a contingency for overtime or agency costs? Predicting when staff might go on sick leave is impossible, but you can build capacity into your budget for it. If money is tight, could you provide cover in-house rather than use agency staff?

ICT is another area where schools struggle to control costs. Having an ICT plan and a rolling plan of improvement is a manageable way to ensure hardware is replaced every five years and that there is money in the pot for new programmes and software. An ICT audit can help you identify what should be in your plan. Consider as well moving your storage to the cloud, as it works out cheaper than using servers.

SEND is another area where overspend is common so it is vital that you fully cost your provision, ensuring that how much it costs to provide support for pupils is balanced against the additional funding you receive. If the amounts don’t align, consider how you could provide support differently – for example, moving from one-to-one support for some children with SEND to a team-teaching approach for small groups.

 

Other considerations

Your budget should reflect your school’s strategic plans for growth and development, and the resources you are going to need to get you there. If reading is the next big priority, have you factored in buying a scheme or extra books to help you achieve your goals?

The biggest mistake we see with the Pupil Premium is the amount being “double-accounted” so ensure that you have calculated your Pupil Premium staffing costs before adding additional non-staffing expenditure.

Once you have a more realistic picture of your out-goings, you need to ensure what you have to spend is also as accurate as it can be.

Look at what your local authority is predicting and your own admissions data from previous years to build an accurate forecast of likely pupil numbers – while nationally pupil numbers will fall, it does not mean they are expected to fall in every locality (see Cruikshanks, 2024). Factor in any other relevant issues such as a change in your Ofsted rating, nearby schools closing or merging, or any reputational damage your school may have suffered.

 

Check your work

It is essential to check your budget before finalising it. The Integrated Curriculum Financial Planning Tool (DfE, 2019) is very helpful, particularly in ensuring your staffing levels are within the national thresholds.

For example, a teacher contact ratio of 0.78 is within the threshold, but if yours is 0.60 it would suggest that you are over-capacity. This could be because you have high numbers of pupils with SEND needs, but it is helpful to understand this before submitting your budget.

There are also external sources of support available and of course your council will review your budget when they receive it.

 

Be prepared to make difficult decisions

If you and your senior leadership team cannot make the figures balance, there may be some low-hanging fruit – doing less photocopying, reviewing stock before placing orders, stopping/capping overtime, or updating teaching assistant contracts to include lunchtime supervision, for example. Reviewing contracts for caterers, cleaners and suppliers can also save money.

Other decisions are tougher to make. Can you reduce staffing costs without affecting educational outcomes? Can you use resignations as an opportunity to restructure or replace upper pay scale (UPS) teachers with less experienced staff? Talk to your team about reducing hours or shedding posts as early as possible to reduce uncertainty and impact on morale. None of this is easy, but sometimes we have little choice.

Think about the added extras you provide too. If after-school clubs are not covering their costs, how can they be adjusted to become more financially sustainable? Are all your enrichment activities breaking even? If they cannot be fully subsidised by parents, can they be justified in the long run?

It is worth doing a full audit to see exactly what you are getting for your money and whether the “nice-to-haves” have now become harder to justify.

 

Consider additional revenue streams

Hiring out your facilities can bring double rewards. Not only do you get the money, but it helps generate goodwill by turning your school into a community hub used by everything from sports clubs to Scouts and Brownies, fitness classes, and knitting circles.

Working closely with your parent-teacher association is also vital. According to the charity Parentkind, its PTA members raise an average of £9,000 a year for their schools. If you can’t afford something in your budget, talk to the PTA about how they might help.

Crowdfunding is another option, plus there are also various options for grant funding. Consider taking a look at Grants4Schools and FundEd (see further information).

There are also specific funding pots for a wide range of educational activities, as well as local community pots set up by businesses, foundations, and charities.

 

Take action for the future

If you find that pupil numbers are dropping to such an extent that your school is no longer financially sustainable, this could also be the time to consider federating with one or two other schools to make sure that your money goes further. This is a big move but brings with it considerable efficiencies of scale. Such a move allows for centralised administration, shared site management, teaching capacity, CPD and more to ensure that budgets are maximised while minimising the impact on educational outcomes.

 

Final thoughts

There are tough times ahead. Spending wisely over the next few years will help schools navigate the challenges of falling budgets and ensure children are still given an educational environment where they can flourish.

  • Jackie Keegan is a resource adviser at HFL Education. Formerly Herts for Learning, HFL Education is a not-for-profit organisation providing services, training and resources for schools, including access to advisers and subject experts. This year Headteacher Update is working with HFL Education to publish a series of subject-specific best practice articles. Find all the articles in this series via www.headteacher-update.com/authors/hfl-education  

 

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