THE amount of money held in school balances in Merthyr Tydfil has fallen by nearly half in a year, a report has said.
Figures from a cabinet report on Wednesday, October 2, show that at the end of the 2023/24 financial year, schools’ balances held in reserves were £2.1 million, representing a 45% reduction year on year. This included four schools in a deficit budget position, which is 17% of all Merthyr Tydfil Council schools.
Based on information shared by all local authorities across Wales, schools’ balances at March 31, 2024, fell across Wales year on year by 54%, and 21% of all schools were in deficit compared to 8% the prior year, reflecting a similar position to Merthyr Tydfil, the report said.
For 2024/25, the schools’ formula funding for Merthyr Tydfil, which was grown to include pay awards, energy inflation, general inflation increases and pupil number changes, had a cut of 3.9% per school applied after these and this was in addition to the 2.98% cut applied in 2023/2024.
For the current financial year, schools have cut a total of 49 posts (23 teaching, 21 learning support assistants and five other) with 55% of these having been reduced from September, 2024, to support the balancing of budgets and medium term financial plans.
The report said that most of these posts were fixed-term contracts with less than two years’ service but seven of the posts had resulted in redundancy payments due to length of service, although no compulsory redundancies had been needed yet.
Other ways in which schools have chosen to manage their budgets include cuts in capitation spend, IT, agency cover, and reducing building maintenance costs.
Even with this reduction in posts and the other savings, schools’ balances are still budgeted to decrease by £2.5 million by March 31, 2025, to an overall deficit of £486,000.
Across Wales 12 local authorities have at least 20% of their schools in deficit and four have at least 35% with two local authorities having an overall negative balance position across their schools’ budgets.
At the end of the 2022/23 financial year, schools’ balances held in reserves in Merthyr Tydfil were £3.84 million, a year on year reduction of 39% compared to the average reduction across Wales of 29%.
For the 2023/24 budget, the schools’ formula funding, which was grown to include pay awards, energy inflation, general inflation increases and pupil number changes, had a reduction of 2.98% per school after these were applied.
To balance budgets, schools cut 45 posts (17 teaching and 28 learning support assistants), the majority from September, 2023.
The report said that due to the financial climate, a temporary suspension of the direction of schools excess balances and clawback policy was agreed from the 2023/24 financial year onwards.
The report said: “This recognised that schools are currently managing their balances over the term of the Medium-Term Financial Plans (MTFPs) to ensure they balance budgets on a sustainable basis, rather than needing to use up excess balances in the immediate financial period following balances being held above prescribed thresholds.”
During this period of funding pressure on school budgets the local authority is analysing schools MTFPs, and where these are budgeted to be within prescribed limits over the term of the MTFP, an excess spending plan is not being requested but if they exceed these limits over the term of the MTFP an excess plan will still be required.
A change to the criteria for categorising schools in terms of financial risk has been needed so that yellow applies to two years of excess balances (instead of one year) and amber applies to at least three years of excess (instead of two years).
The report showed that 71% of schools were either high risk (red) or medium to high risk (amber) in 2024/2025 compared to 58% the previous year with 29% of schools having moved into a higher category of risk, 54% remaining the same and 17% moving into a lower category of risk.
The number of schools at high risk (red) has increased from four to six and these six schools have applied for planned licensed deficits with three continuing from 2023/24 and three new applications.
Four of these schools have submitted plans to recover the deficit over the period of the medium-term financial plan and two schools are currently unable to balance, the report said.
It said that discussions were ongoing with these schools to identify additional savings opportunities to ensure the deficit budget was stabilised during 2024/25 and recovery plans were addressed to return to a balanced budget.
Further posts will be reduced across these six schools in line with their recovery plans over their medium term financial plan to balance their budget, the report said.
An extra nine schools are projecting a deficit budget position in years two and three of the medium term financial plan and the report said that further work would be done with these schools during the Autumn term to consider plans to address these deficits before April, 2025.
In total, 15 of 24 schools (63%) are currently projecting a deficit budget at some point over the medium term financial plan from 2024-2027.
The report said that, although not all of the nine additional schools would require a deficit budget during the MTFP, this identified those schools that needed to cut spending and usually to cut staffing in order to set a balanced budget.
