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Cuts loom as energy and supply teacher costs drive hundreds of local authority schools into deficit

School finance
The proportion of local authority schools with a budget deficit has increased dramatically and average revenue balances for schools in surplus have fallen.
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The latest figures from the Department for Education (DfE) show that 13.1% of local authority maintained schools report an overall budget deficit in 2022/23.

This is an increase of 4.3% on 2021/22 when 8.8% of schools were in the same position.

It has sparked a warning from the National Foundation for Educational Research (NFER) that at least one in 10 schools will need to make cuts in the coming year if they are to balance their finances.

Any school running an overall deficit is expected to take action towards returning to a neutral financial position.

The 13.1% figure equates to 1,552 schools, with a further 53 schools (0.4%) reporting a revenue reserve of £0. The figures show that 10,258 schools (86.5%) are in surplus.

Broken down by phase, 12.3% of primary schools are now in deficit (up from 7.6%) as well as 13.4% of secondaries (up from 12.9%).

 

In the red: The latest figures show that 13.1% of local authority schools are now in deficit thanks to the cost of living price rises. A 60.8% increase in school energy bills and rising supply teaching costs are two key drivers (source: DfE, 2024)

 

The figures show that the average spend per-pupil by local authority maintained schools was £7,068 – 8% higher in cash terms than in 2021/22.

Meanwhile, the average revenue balance of schools was £162,800 in 2022/23 – £16,000 lower than in 2021/22. 

The increasing deficits have been caused by the continuing impact of the cost of living price rises, including a staggering 60.8% increase in the energy costs being paid by schools – from £301.8m to £485.3m.

Other areas which have seen increases in expenditure include a 12.3% increase in money spent on supply teachers (£698.1m was spent in 2022/23, including £486m on agency supply teachers).

Overall, the figures show that while schools’ income rose by 3.3% in 2022/23 their expenditure rose by 5.1%.

The total schools budget is expected to increase from £44.4bn in 2019/20 to £59.6bn in 2024/25 in cash terms. This was expected to be around 3% higher than 2010 in real-terms. However, soaring inflation amid a cost-of-living crisis has hit schools hard, with the Institute for Fiscal Studies predicting that schools’ spending power per-pupil will “stagnate” this year and next given the cost pressures the sector is likely to face. The IFS predicted last term that schools’ purchasing power would be 3% lower in 2024 when compared to 2010.

Last term the NFER published a series of research reports looking at the impact of the cost of living crisis on schools, school staff and families.

Its report on schools found that only one in five of all schools have managed to avoid making cuts to any areas of their provision in response to the increased cost of living.

Jenna Julius, research director at the NFER, said: “The DfE data highlights that recent cost pressures have, on average, deteriorated the financial positions of schools in 2022/23.

“These figures highlight that at least 10% of schools are likely to need to make cuts in the coming year to balance their finances.

“Without urgent action now – and with cost-of-living increases continuing to impact schools – these budget challenges risk having far reaching and long-lasting impacts on pupils, particularly those who are most vulnerable, across both mainstream and special school settings.”