Background to the report

A financially sustainable school system is vital to the learning and development of the country’s children. Schools are financially sustainable when they successfully provide a good-quality education to all their pupils within the income that they receive.

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The NAO last reported on the financial sustainability of schools in 2016. We found that, overall, the financial position of primary schools had been relatively stable, however, there were signs of financial challenges in secondary schools. We concluded that the Department for Education’s (the Department’s) overall schools budget, as set out in the 2015 Spending Review, was protected in real terms but did not provide for funding per pupil to increase in line with inflation. Therefore, mainstream schools would need to find significant savings to counteract cost pressures. At that time, the Department was developing guidance and support to help schools improve their financial management, but had not completed work to help schools secure crucial procurement and workforce savings.

Scope of the report

This is the second of two reports which follow up aspects of our 2016 report. In July 2021, we reported on School funding in England, covering revenue funding for mainstream schools and cost pressures, and how funding is distributed to schools. Alongside the work on school funding, we have also examined the financial sustainability of mainstream schools in England. This report covers:

  • schools’ financial health (Part One); and
  • whether the Department has supported schools effectively to improve their financial sustainability (Part Two).

Report conclusions

The financial health of the mainstream school system has held up well despite the funding and cost pressures that schools have faced in recent years, although the data do not yet reflect the impact that the COVID-19 pandemic may have had. Most maintained schools and academy trusts are in surplus, but there are significant pressures on some maintained secondary schools. The concern in relation to the academy sector is that a sizeable minority of academy trusts are building up substantial reserves, meaning they are spending less than their annual income on their pupils. Ofsted inspection ratings suggest that mainstream schools have generally maintained educational quality, although there are indications that the steps schools are taking in response to financial pressures may adversely affect aspects of their provision.

Since we last reported in 2016, the Department has implemented a range of sensible programmes to support schools to improve their resource management and achieve savings, which have generally been well received by the sector. The programmes have added value and helped schools to achieve savings. We found, however, that the Department’s data have not been sufficiently complete or reliable to assess whether the programmes are having the impact it intended or achieving value for money. The Department has started to improve its data but, until it has better information, it cannot make fully informed decisions about the support it offers to schools and how continuously to improve it.

“A financially sustainable school system is vital to the learning and development of the country’s children. The Department for Education implemented a range of sensible programmes in recent years that have helped schools to achieve savings. However, until it improves the reliability of its data, it will not be able to make fully informed decisions about the support it offers to schools.”

Gareth Davies, the head of the NAO

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Publication details

Press release

View press release (25 Nov 2021)

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