Concerns Rise as Government Suggests Using Reserves

School leaders and sector experts have condemned as “worrying” and “fantasy economics” a government suggestion that schools could use reserves “earmarked for other purposes” to respond to financial challenges this autumn.

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In response to a Tes query about school requests for financial assistance, the Education and Skills Funding Agency (ESFA) said that many trusts were “well placed” to respond to current economic “challenges” and that this may mean “using reserves, which we know trusts have worked hard to build up and may well have been earmarked for other purposes”.

This suggestion has been met with criticism from school leaders and sector experts, who say that it is “worrying” that the government is suggesting that schools use their reserves to cover costs when these funds have been “hard-earned” and are often needed for essential purposes such as building maintenance or staff training.

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The Dfe’s suggestion that schools use their reserves to cover costs is ‘worrying’, say school leaders. Tony Cook, the headteacher of Hove Park School in Brighton and a former National Association of Head Teachers (NAHT) president, said that the suggestion was “fantasy economics” and would not be viable for many schools.

“The reality is that most schools have very little in the way of reserves, and those that do have often earmarked them for specific purposes such as building maintenance or staff training,” he said.

“To suggest that they should now use these funds to cover the costs of additional Covid-related expenditure is fantasy economics, and it is worrying that the government seems to be suggesting this as a viable option.”

The Academies Financial Handbook, which sets out the rules governing academy finances, states that reserves should only be used for “unforeseen or exceptional expenditure” and not to “smooth out normal fluctuations in income and expenditure”.

However, it is up to individual trusts to decide how much they should hold in reserves and how these funds should be used. In addition, the rules allow for trusts to use their discretion in cases with “compelling reasons” to do so.

The DfE has said that it is aware of the financial pressures facing schools and is providing funding to help them meet the costs of Covid-related measures such as cleaning and PPE.

A spokesperson said: “We are aware of the financial pressures facing some schools and academies as a result of the pandemic, which is why we have provided significant extra funding to help them with the costs of measures such as increased cleaning, PPE and small group teaching.

“We have also set clear guidance on how best to use reserves, which we expect schools and trusts to follow. In cases of significant financial difficulty, we are always open to having a supportive conversation to explore the challenges trusts face.”

But some experts have warned that the extra funding provided by the government is not enough to cover the costs of Covid-related measures and that many schools will be forced to dip into their reserves to balance their books.

Jonathan Simons, head of education at think tank Politeia, said that the DfE’s suggestion that schools use their reserves was “entirely reasonable”, given the extra costs faced by schools as a result of the pandemic.

However, he added that it was important for the government to provide additional funding to schools in the long term to rebuild their reserves.

“In the short term, it is entirely reasonable for the government to expect schools to use their reserves to cover the extra costs associated with Covid-19,” he said.

“However, it is important that the government provides additional funding to schools in the long term so that they can rebuild their reserves and prepare for future challenges.”

Ultimately, they say, this is a sign of the government failing to provide adequate school funding, and they are calling on the government to address the issue urgently.

Do you think the government is right to suggest that schools use their reserves to cover costs? Let us know in the comments below.

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