Statement regarding Schools Forum decision

I am taking Chairman's privilege to make a statement on the decision of the Schools Forum to pass back money from some of our maintained School's reserves to the Council. This will then be used to help tackle the very significant growth in the number of schoolchildren with special educational needs and that we must support in order to help them achieve the best possible outcomes.

I have said to the Leader of the Opposition and the Leader of the minority group that I will take questions after this statement but only from them and I will have to limit them since we have a lot of important reports to consider and decisions to make this evening.

Before I talk through the events that led up to the decision of the Schools Forum, whose membership is comprised of Headteachers, School Governors and other key stakeholders but not West Berkshire Councillors who are not members of the Schools Forum - no West Berkshire Councillors can vote on that Forum and therefore this Council cannot vote on any matters it considers - I want to give some background on the pressures that our Children and Young People's Directorate is facing.

Since 2020, pupils with Special Educational Needs (SEN) across our District has grown from 1,032 to 1,538, almost a 50% increase. Numbers continue to grow with 407 plans requested in the last 12 months and 284 agreed. To be clear we do not resent that, but the money to give that support must be found from somewhere.

This year we are in, 2024/25, we are already forecasting an overspend in Children and Family services of £7m on supporting SEN pupils and a further £3m supporting Children with a disability and Home to School Transport, including assisting SEN pupils to get to school and back. The Conservative Government allowed Councils to roll up deficits in the spend on Special Educational Needs pupils (what is called the "High Needs Block") and that now totals over £1.8B in Councils across England. Our accrued deficit in West Berkshire in the High Needs Block was £9.3M in March of this year and is estimated to rise to £16.3m by March 2025.

Put another way, this Council budgets to spend £29M on Special Needs children and actually spends £35M and we are allowed to roll that debt up, but it is unsustainable.

Coincidentally a report out today and reported in the Guardian says:

A £5bn debt crisis caused by out-of-control overspending on special educational needs could explode in less than two years, bankrupting scores of England's local authorities, the UK government has been warned.

The crisis stems from the failure to properly fund a huge increase in demand for Special Education Needs and Disability (Send) services over the past decade, triggering an "existential" crisis for councils which have "no obvious means of paying off the debt".

The highly critical report published by the Local Government Association (LGA) and the County Councils Network (CCN) said SEN services in England were overwhelmed and dysfunctional. Fundamental reform to the system was not only inevitable but unavoidable, it said.

In simple terms we can't go on like this - it will bankrupt this Council and many other Councils across the country.

However, I will now add that this Council is managing its finances well under enormous pressure and I am giving a re-assurance to our residents and staff that we are coping financially and delivering improvements in services.

But, given the High Needs Block challenge, we will be writing to our MPs to urge them to press the new Government to take rolled up SEN debt on to the Government's Balance sheet and I will be talking to the Leaders of the Berkshire Unitary Authorities to join us in that request.

Now let's look at the amount of reserves we were talking about in our Schools' Bank accounts. This is £13.5M presently and has grown from £4m in 2015, up by nearly 350% in 8 years.

So, against this backdrop of rising demand and limited financial resources, let me provide a chronology of the events that have taken place over several months as we discussed this very serious situation with our schools - what are called maintained schools - we are not talking about Academy schools here.

In the autumn of last year, we asked the Headteachers of our maintained schools who sit on the Headteachers Funding Group, the HFG - don't we just love these three letter abbreviations in the public sector - to consider clawing back to the Council some schools' reserves, to help us manage the increasing cost of the growth in the number of our SEN children. We are entitled to ask them to do this, where a school has uncommitted reserves, so not allocated to a project or specific spending requirement and will not affect their day-to-day finances. In short if we are clawing back reserves no school will go into deficit as a result and their budget this year will not be impacted.

The School's Forum consulted all maintained schools on a proposal to clawback uncommitted reserves where these were over 10% of the school's annual funding allocation - in other words the money they were deemed to require to run the school as laid out by the DFE. 

The response to this consultation showed that 68% of schools were in favour of adopting this approach and in this financial year.  National guidance would allow for the clawback of such reserves where they are over 5% in secondary schools and 8% in primary and special schools, and so the local policy advocated at this time and subsequently adopted is not as restrictive or high as it could be under Government rules.

So, to make this as clear as possible, the maximum amount that could be paid back each year is the amount of school uncommitted reserves in excess of 10% of their annual budget. And this is subject to leaving the schools with a minimum of £50,000 balance. Some schools have nowhere near £50,000 of reserves whilst one school has built up £3.8M of reserves on an annual budget of £7.5m. Now this Council has reserves of £4.1M on an annual budget of £174M a rather useful comparison, I suggest.

We have more schools in a deficit in their budget in West Berkshire than we have in surplus.

And let's look at DFE guidance on the matter - these are the words of the DfE: this states that the mechanism should be focused on only those schools which have built up significant excessive uncommitted balances or where some level of redistribution would support improved provision across a local area.

The consultation response agreed that any clawback of reserves should take place in the 2024/25 Financial year, that is, the year we are in.

Why do Schools keep reserves? I can speak with direct experience here as I was a Governor at Kennet School for 20 years and a Governor of Spurcroft school for two years in the past. Schools are provided with running costs annually under a national formula laid down to us by the Government via the DfE. We don't decide that figure, we simply pass through the money. The formula is meant to result in each school getting the money it needs to run the school and is based on the number of pupils in the school.

Schools will develop reserves if they manage to spend less than the amount provided to run the school through good financial management. Separately, they may also develop reserves through fund raising events, often through the efforts of a Parents Teachers Association (PTA) or charitable donations and I will speak more on this aspect later.  It is important here for me to say that Schools should separate this money from income the school may generate, through lettings of halls or playing pitches or catering activity for example, which should form part of the school's budget and these monies will contribute to reserves at the year end.

Schools also develop reserves to spend on equipment or towards enhancing new buildings or extra curriculum activity such as school trips.

A school with reserves is a healthy school and we generally applaud how those schools manage their finances.  We would expect each school to develop a reserves policy as to how they will use reserves and to allocate their reserves according to the policy. So, a school might reasonably say that they need some of those reserves as a buffer in case the money they receive from Government annually falls somewhat short of what they need - I feel sure they would all say that is always does.

I am recommending that all Schools develop a reserves policy - they are not mandated to do so but it would help them consider how they deploy reserves. So, they might allocate a percentage to help the budget if it is under pressure, they should then allocate reserves to projects and purchases they want to make both in the short and long term - money towards building projects where they want to enhance the facilities that this Council's capital programme is providing for instance.

As an example, Falkland school is working with us to design 8 new classrooms and are pleased at how this project is progressing but if they wanted to add something to that design and had reserves available to do so then those reserves could be allocated towards the project.

If the reserves are unallocated however then we might reasonably suggest that a school has more reserves - money in the bank - than they might reasonably need to hold. You will hear this money referred to as excessive reserves.

It is also important to state here that this Council spends an average of £5m on capital projects in our schools annually on things like buildings and facilities so, to be clear, the school doesn't have to find money for that on their own. They may contribute towards it of course and as I have just stated.

All of this works well - or should do. But some schools are in the fortunate position of having reserves that we and the DfE consider to be in excess of their needs. They may argue that those reserves exist because of their good financial management and, as I say, we applaud that. BUT I would expect all Headteachers in Maintained schools across our District to want all schools across West Berkshire to do well and want to support each other - in expertise and knowledge, in facilities and yes, in sharing out money that they shouldn't need to call on.

No school is an island and I remember how well Headteachers supported each other when I was a Governor - I feel sure that same sense of teamwork exists today.

So back to our chronology - 68% of the Headteachers said that a percentage of excess reserves should be passed back to the Council to use for the support of SEN children - not on anyone or anything else - and that should be done in this financial year.

The Schools Forum then met to consider this - the Schools Forum consists of West Berkshire Headteachers voting on matters that affect our schools and they voted on this matter in December 2023. Again, I must state again that NO West Berkshire Councillors are able to vote on that Forum, and this Council therefore does not have a vote on any matter they might discuss and decide upon. We have two Councillors who can attend the Forum, Cllrs Codling and Cottingham but they cannot vote.

Despite the consultation recommending that the clawback take place and in the current year budget, the School's Forum voted unanimously for the clawback to take place but not until the next financial year 2025/26.

We were dismayed at this and discussed with the Heads Funding Group our thoughts around referring the matter to the Secretary of State for Schools.

We need this money now to make a difference to children in need of help through the SEN programme across the district. Let's be clear about this as well; the decision looked wrong to us, given the Consultation response. There are too many times - and it has certainly happened in this Council in past years - that responses from consultations have been ignored.

The Secretary of State might have decided not to allow us to implement the clawback at all or he might have said that we should clawback more than we had suggested- taking reserves in excess of 5% of their budget share for secondary schools and reserves in excess of 8% of their budget share for Primary Schools - we had suggested that this figure be 10% across both Secondary and Primary Schools.

It was not a foregone conclusion, then, that the Secretary of State would have supported the clawback at all - he might have stopped it, this year, next year and for the foreseeable future.

To pick up our chronology again:

At their meeting on 15 July 2024 the School's Forum reconsidered the issue and voted 6 - 1 in favour of the clawback being implemented in the 2023/24 financial year.  One of the criteria used throughout was that surplus funds would not be taken where a school would end up with an in-year deficit, and that any balances committed remain with the schools, which was especially true for surplus balances related to staffing. This was assessed based on the budget plans school provided to us for the 2024/25 financial year.  In short, they should not be impacted financially this year.  This has been checked by us in consultation with the school's affected.

I said I would come back to monies raised by a School's PTA, charitable donation or other fundraising event by parents - where the school doesn't have a PTA for instance.

Let me be absolutely clear:

It is not the intention of the Council/Schools Forum to take PTA type income from any school. Funds of this nature should be managed in an account that is separate to the main school revenue account and can then be very clearly identified.

In order for us to be certain that the funds identified to be clawed back are correct, Officers from the council, including internal audit, finance and education are working together to verify the calculations with the schools affected. They are reviewing the documentation provided by the schools. Where it is necessary they will seek additional information from them. It may be that there will be adjustments in the clawback figures, and we will make sure that calculations are fully understood and transparent to schools and parents. Already I am told that two schools of the twelve affected will not be subject to clawback following reviews.

I am inviting any school that believes that their clawback calculation has included funds raised in the way I have described and should therefore be excluded, to contact us, and we will work with them to verify such sums and have them excluded where that is the case. Similarly, do contact us if you believe that the in-year budget will be impacted although we would need new evidence on this as it has already been reviewed.

So, after all that detail, lets recap

1. Schools' reserves have risen by 350% since 2015 from £4m to £13.5M.
2. The Council's deficit in our Special Educational Needs budgets - the High Needs Block - is forecast to rise to £16.3M by March 2025
3. 68% of Schools agreed with the Council's request to clawback excessive reserves in this financial year.
4. Surplus funds would not be taken where a school would end up with an in-year deficit, and any balances committed will remain with the schools,
5. The Schools Forum voted 6 - 1 in favour of the clawback being implemented in the 2023/24 financial year
6. No West Berkshire Councillors voted on these proposals
7. All of the money clawed back will be used to help children across the District including those schools who will have been subject to the clawback.
8. All money raised by a School's PTA, from charitable donations and other appropriate actions will be excluded from the calculations of the clawback amounts
9. It is entirely false to state in a letter published in the NWN today that "school's previously agreed budgets for 2024/25 were no longer deliverable".
10. All schools that could be affected were able to present to the Schools Forum but the vote was taken in their absence. To be clear on this point, the schools who voted for the clawback will not get the money resulting from it directly into their bank accounts.
11. This is not a one-off payment to reduce the High Needs Block deficit - it is to be able to use the money now to mitigate how much that deficit will rise by and it will continue to rise.

I have been challenged to step in on this matter and we are working with all schools to review their reserve balances and where they can show that there are funds that should not be included in our calculations then we will exclude those funds - already two schools will be excluded from the clawback as a result of this.

I have said that fairness is at the heart of everything we do as a Council, and we are working very hard to make sure that affected schools believe the clawback to be fair to them BUT we will also make sure that we are fair to all schoolchildren across our District and I feel sure that all Headteachers would support that objective.