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Changing financial climate

23 October 2015

School business manager blog...

One of the main headaches I face as a business manager is ensuring I set a balanced annual budget. This has become particularly challenging in recent times with education experiencing a real term reduction in funding. This financial pressure is likely to grow over the next 12 to 18 months with the impact of the changes to employers’ contributions to both National Insurance and Teachers Pensions, adding to the cost of living increases to teachers’ salary points.

So what has changed and what will be the implications for your school?

The introduction of the new state pension will see the end of ‘contracting-out’ schemes, a status afforded to both Teachers Pensions and the LGPS. These schemes resulted in employers and employees paying lower National Insurance contributions (NIC). The abolition of contracting-out will therefore have cost implications for employers due to the loss of the NIC rebates. From the 6 April 2016 employers' Class 1 NICs will increase by 3.4%.

Following an actuary review of the Teachers Pension scheme contributions for employees and employers were revised from 1 September 2015. This resulted in an increased employer’s contribution of 16.4%, up from the 14.1% that was previously payable.

If this wasn’t already looking tough for schools, the 2015 Teachers Pay and Conditions document recommended a 1% uplift be applied to the statutory minima and maxima of all pay ranges in the national pay framework, including allowances, with two exceptions – a 2% increase to the maximum of the main pay range and no increase to the maxima of the eight headteacher pay group ranges. All of this is subject to the teachers fulfilling their performance related pay criteria, but with no additional funding to pay for the increased expenditure, the pressure on schools and academies finances has increased still further.

What next?

Prior to this year’s General Election, Lord Nash, the minister for schools highlighted the changing financial landscape facing the schools and academies sector.

“Education in schools has operated in a relatively benign financial climate for a long time. But a new generation of school leaders is going to have to emerge to cut their cloth to drive efficiencies.

“This is one of the biggest challenges facing the school system: schools will increasingly have to do more with the same money.”

The pressure to find efficiencies is now stronger than ever before. Lord Nash used his speech to encourage schools and academies to become more effective in their purchasing, using the economies of scale afforded to them through the academies movement to drive down the cost of goods and services.

Improving procurement to reduce expenditure is certainly the first approach a school should take to cost cutting, however with schools spending approximately 80% of their expenditure on staffing, the need to look at restructuring cannot be ignored.

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