How school finances are just the business

By Simon Atkinson
Business reporter, BBC News

Image caption,
These days, it is not just maths teachers who need to have a head for figures

When it came to trimming the budget, Mike McKeever took a look at how much it was costing to trim the grass.

And it turned out that just by changing contractors, he was able to save an impressive £25,000 a year.

That is a handy amount of money to claw back for any business.

But given that Mr McKeever is the head teacher of a comprehensive school in Nottingham, the results are even more tangible.

"It might not sound a lot in the scheme of things," he says. "But 25 grand is about the salary of a newly qualified teacher."


That saving - on maintaining the grounds and playing fields at Trinity School - was a result of moving away from the local authority contractor and putting the contract out to tender.

It is the kind of deal that schools have increasingly been able to strike for themselves since local authorities began delegating budget control to schools 20 years ago.

That gradual release of the financial shackles has led not only to more freedom, but also some innovation.

It is now fairly common practice, for example, for schools to pool their resources in order to get better prices on big-ticket items, such as the latest computers and technology or furniture, by making bulk purchases.

And such anecdotes serve as examples of the way that state schools are increasingly run as businesses.

Of course their "product", ultimately, is the education of young people. There are no shareholders to answer to and nor, it is widely believed, should they be generating profits. But schools do need to make the books balance.

Many run up surpluses by not spending their full budgets. Schools in England held surpluses of £2bn at the end of the last school year, according to official figures - an increase of almost 15% on the previous year.

But at the other end of the scale, an estimated one in six schools were in deficit and essentially had to borrow money from the local authority to keep going.

'Good housekeeping'

At Lutterworth College in Leicestershire, Graeme Hornsby reels off a string of ways in which revenue has been brought into the school or expenditure has been cut.

These include earning about £50,000 in the past year from hiring out facilities outside of school hours, as well as applying for a grant to part-fund a £200,000 upgrade of the on-site catering facilities.

Then there is the so-called "good housekeeping" - shopping around to find the best deal from electricity suppliers and phone companies and reducing the amount of paper the school needs by moving more resources online.

Lutterworth has about 2,000 students aged between 14 and 18, with a budget of more than £10m a year.

However, Mr Hornsby is not its finance-focused head teacher, but rather the school's business manager.

The job used to be done in schools, at least in part, by what was known as a bursar.

But now it is a full-time role found in most secondary schools in the UK, created to allow the head to concentrate on educational matters rather than doing the accounts.

Image caption,
The way schools are run has changed considerably in the past 20 years

Some institutions, such as Lutterworth, have a group of people to run the business side of the school. Mr Hornsby's team, for example, includes a facilities manager, a finance officer and a human resources officer.

"We look after everything that is not directly related to teaching," Mr Hornsby says.

"Our job is to keep as much of the business management side of things away from the teachers' desks, allowing the people who have the expertise in improving education and learning to focus on that."

While being employed by a specific school, business managers such as Mr Hornsby will often spend some time with local feeder schools.

Again, it takes pressure off teaching staff but, he says, could also have longer-term benefits.

"If I can help those those schools make savings, then that's money they have to invest in younger children, who are going to be our students here anyway."


Besides applying for grants and cutting bills, the new government last week offered more schools in England a new way of potentially improving their finances - encouraging them to become academies.

While publicly funded, academies operate completely outside local authority control.

Politically, they are controversial, with many politicians, teachers, parents and unions having attacked the concept for being a waste of money and even damaging schools and communities.

However, they have more freedom than other schools in the state sector over issues such as teachers' pay and how the school is governed.

But from a business perspective, the big advantage of becoming an academy is not the level of control over spending, but rather how much there is to spend.

Some estimates suggest that getting academy status can see a school's budget increase by between 8% and 15% - as it becomes funded directly by the government, rather than being "top-sliced" by local authorities.

However, Malcolm Trobe, policy director at the Association of School and College Leaders, an organisation which has expressed concern at too many schools becoming academies, says the benefits are unlikely to be more than a 5% budget increase.

And much of this would be needed to pay for things no longer provided to academies by the local authority, Mr Trobe adds, ranging from educational welfare officers and speech therapists to child protection advice and in-service training courses for teachers.

Mr Hornsby at Lutterworth points to other implications, which might lead to schools mirroring "real" businesses even further.

The most significant of these relates to staff, whose salaries generally eat up more than 60% of a school's budget.

"If a school becomes an academy, then it would become the direct employer of all the staff," he says.

This means issues dealt with by the local authority, from grievance procedures to redundancy, would instead become the school's full responsibility.

"These are issues that would become a consideration," he says.

'More to spend'

There are currently 203 academies in England, compared with about 3,500 secondary schools. But Sally Coates, the principal at Burlington Danes Academy school in west London, expects the benefits offered by academy status will entice more into taking up the government's invitation to convert.

Academies have greater flexibility over the curriculum they teach.

But Ms Coates says the real benefit "is in how much more money we have to spend" - something she says has allowed her to employ more teachers and reduce class sizes.

There is still a good relationship with the local authority, Ms Coates adds.

But she says because her budget had not been top-sliced, she could choose which services to buy from the authority, which ones to buy from elsewhere and which ones "we didn't need to bother with".

'Useful acumen'

Existing academies have a sponsor, who contributes towards school buildings and offers other support.

At Burlington Danes, that role comes from parent charity Absolute Return for Kids (Ark).

Backing several academies, it is an organisation chaired by Stanley Fink, the Conservative party's co-treasurer, who made his £70m fortune as chief executive of Man Group, the world's largest quoted hedge fund manager.

Ms Coates says these contacts made it easy to tap into financial advice on where to invest money that the school has been putting aside to pay for improved sports facilities.

"Teachers tend not to know much about that sort of thing," she says. "So having such business acumen to hand is really very useful."

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