The HFL Education Business Services Podcast - How do school leaders manage financial pressure?

As financial pressures across education continue to intensify, more and more schools are finding themselves approaching, or already in, deficit.

In this episode, Catherine Loake, Director of Business Services at HFL Education, is joined by Lisa Holroyd, Head of Academies Finance, to explore what school leaders can do when finances become unsustainable.

Together, they unpack the reality behind the “perfect storm” facing schools: rising costs, increasing SEND needs, falling pupil numbers, and shrinking funding. With many schools feeling they’ve already cut everything they can, this episode tackles the difficult question — what’s left to do?

Bite-sized listening for headteachers, CEOs, school business leaders and governors, the series helps leaders step back from day-to-day pressures, reflect on the bigger picture, and explore practical ways to lead their organisations sustainably and strategically.

Host: Catherine Loake (Director of Business Services)

Guest: Lisa Holroyd (Head of Academies Finance)

Created by: Rachel Lodge, Paul Hayward, Biljana Miljkovic

Questions? Email podcast@hfleducation.org.

HFL Education (formally Herts for Learning)  is a not-for-profit organisation providing all the services, training and resources needed to deliver a great education to every child.  

Transcript

Catherine: Hello and welcome to the HFL Education Business Services podcast. I'm Catherine Loke, the director of business services here at HFL Education. We wanted to bring you this series of podcasts because we recognise that the role of school leadership is growing ever wider, ever deeper, and it's becoming more and more challenging to find the time to unpack some of the key issues away from frontline teaching and learning. Today I'm joined by Lisa Holroyd. Lisa is our head of our academy's finance team. So, Lisa, you have spent a lot of time working with schools in financial deficit. And today we're going to look at, what you can do when you're approaching financial difficulty. it's a really unprecedented time in education right now, isn't it? We're seeing, lots of things converging, almost a perfect storm. We're seeing this unprecedented, period of inflation. We have seen a significant increase in special educational needs and disabilities. we are seeing lots of change that needs to be factored into into costings. It just feels to me that schools have cut all they can cut. Is there anything left to cut? 

Lisa: Well, it's not so much that there's anything left, they've got to continue to work on looking at their staffing, and you'll find that classes are getting larger, we're merging classes now the way you getting two year groups in each class and some schools where the numbers are getting very small, they're looking at three or four year groups, which makes that really unmanageable for the teacher in the class. Things like extra PPA time and leadership time are being cut as well, to help balance the costs. And this obviously has a bigger impact on staff welfare and staff are burning out and we're seeing more and more teachers leaving education because they're just finding it too hard. Curriculum wise as well, schools are having to make cuts and the would be nice curriculum treats, like providing music tuition and additional, nice wellbeing days out for the children, they're all being cut. Trips are now becoming just purely curriculum essential - the would be nice going to Chessington at year end being cut because the parents can't afford it and the schools can't afford it. So what you find there is that there's disengagement from the children as well. Student support, we're looking at cutting because deficits are getting larger, the biggest savings are in staffing, so we're cutting teaching staff to the bone. But not only that, the teaching assistants and the support staff across the school, and this is having an impact on, the running of the school as well. Infrastructure, school buildings are falling into disrepair. And this is actually a false economy because where you've got a slight, roof leak by leaving this because you can't afford it then becomes further down the line, a massive roof replacement, which, you know, even local authorities are struggling with, their budget. So for schools that are maintained, schools that the cost of keeping premises in good repair is costing the local authority more. And for academies, they can apply for the condition improvement funds for any building related work but of course that pot is also shrinking and the demands on that pot is getting larger. 

Catherine: Well that all sounds very grim, and I think everyone working in education knows how tough it currently is. And I suppose one of the things we all grapple with is the morality of, of deficit. And I guess if everyone is approaching the cliff edge, the precipice, does it really matter if you tip into the red? What's the incentive to make sure that your school is solvent?

Lisa: Deficits do matter because this will trigger further intervention. In the case of, maintained schools, the local authority will step in. Pre-warning notice or actual warning notices can be issued and schools could have their delegated responsibility removed from them. In the case of academies, the DfE will step in and academies can be given a financial notice to improve which puts a lot more scrutiny on the academy where you have to do additional reporting every single month and you've got to have lots of intervention and lots of, outside consultants stepping in, which almost takes away your power, which, will cause more rise in workloads because of intense scrutiny that they will be under. 

Catherine: So it's kind of a rock and a hard place then isn’t it. It's kind of do it yourself and make unpalatable decisions or have your autonomy stripped and have them done to you. 

Lisa: Yeah. Absolutely. Absolutely. And all these deficits are reflecting, the underfunding that there is in education Deficits are increasing. The SEND that schools are dealing with now has risen considerably even in the 20, 30 years I've worked in education. And we hear regularly from schools saying, oh, my school's been recognised as a school that, you know, is excellent with their SEND, so we're getting more and more children with higher SEND needs. But we're hearing that from every school, not just one or two schools. Schools are no longer given the option about expanding because the fall in pupil numbers, which is a national, crisis, is impacting and this current, stream of children in primary will go through to secondaries who will be hit just as hard as well with falling pupil rolls and obviously they're going to have to start working on not only their staffing structure but restricting their curriculum, to try and keep their books balanced. A lot of the premises related issues are about compliance, where schools have to be compliant with the regulations, and this costs money. Having, some of the tests undertaken, a five year electricity test, is, you know, thousands of pounds that needs to be put aside and spent as well.

Catherine: I mean, you and I both know if you lay out all of the statutory guidance and expectations on schools, we put them all at the table and costed them school budgets, never going to cover them all. So there are hard choices, aren't there? I guess there's two things I'd add to what you've said, from the work I've done with schools in financial difficulty. The first is that deficits like a rising tide, one minute it's sort of lapping at your feet, in the next minute you're literally up to your neck in it, and it just comes on so quickly. The more deficit you're in, the more the unpalatable decisions you have to make. So that's really, really tricky. And the other thing I'd probably say is the morality of this kind of really hurts. Obviously, we know that there is an underfunding in education, but today's deficit is tomorrow's cuts. And if we don't live within our financial envelopes, the quality of the education that tomorrow's children, which are going to be part of a leaders school, setting or trust isn't going to be comparable to today's. And that's, again, I think the counter side of the coin to the moral argument as to why we need to get on top of deficits. 

Lisa: Absolutely. If you’re recognising across the medium term in your three year financial plan that you are heading towards deficit, start acting on it now. Don't bury head in the sand because as you say, if a school is in deficit 30, 40 thousand you've got time to start to mitigate that. When you're looking at hundreds of thousands, it becomes totally unmanageable. 

Catherine: And I suppose the $64,000 question, Lisa, whose responsibility is it? Who's accountable at the end of the day, for ensuring that schools are operating within their financial envelopes?

Lisa: Well, that falls to everybody realistically, because the head teacher and the principals have a responsibility for staying within their financial envelope, the governing body, the trust board, they are there to question and challenge the leadership team to ensure they are staying within their financial, boundaries. And if not, it's about questioning what is it we can do to ensure financial sustainability? Because once schools go into heavy deficit, then they can't maintain financial sustainability. Your school business manager, your CFO, they are there for the operational day to day so that they can, advise the trust board, the governors and the leadership team, and they are there to alert them if they are starting to head into deficit as well. The local authority has a responsibility and as does the DfE, to ensure schools are as funded as well as they can be, but we know the pots are shrinking, but they have responsibility as well to ensure that schools are staying financially viable. As you say, you know, all these restrictions and all this compliance is put on schools and educational and the curriculum. If we lay out it's not affordable, but yet we are seeing inflation busting pay rises and the cost of living is rising. It's all becoming very unwieldy. 

Catherine: And I guess one of the things we always say is control the controllables, but it feels like the uncontrollable are taking over from the controllables now because we've got, rising levels of SEND, we've got falling rolls, we've got inflation. Again, to what extent can a school control their financial position? Are there times when genuinely a school cannot balance its books because circumstances kind of stack up against it? 

Lisa: Sometimes you can be hit all of a sudden you can plan your budget at the beginning of the financial year, and you can be hit with a long term sickness absence, you can get caught out. But what people need to start doing with this is start thinking outside the box a little bit more so they can manage these uncontrollables. Do you really need to get an agency staff in? Is there any capacity with your existing staffing structure? And quite often when we're doing our reviews to support schools, we are there in a supportive capacity, we say look, have a look at your staffing structure, you have got a little bit of flexibility within your staffing structure. It’s not very palatable for some schools, but these are the decisions that have to be made rather than further down the line, going through restructures and having to make staff redundant, which is never a nice road to go along. in closing, what sort of final piece of advice would you give to a a head or a CEO who is looking at a deficit as they're setting their budget this year? I think you've got to look broadly across everything you've got, look at your workforce instead of just rolling forward your budget year on year. Start with a blank sheet of paper, start with your structure. You've got seven classes you need seven teachers. Then look at your SEN need what support you need there. What about your premises? You know, is there any, compliancy issues you need to ensure that you’ve funded for? Is there any major maintenance coming up? Look outside of your school. Start looking in collaboration. We're not talking about going for formal federation, but there is no reason you can't reach out to schools alongside you or even academies alongside you where you can share roles and responsibilities. The federation I was in because it was a small school, what we did is we took the responsibility of curriculum, the responsibility of having two, one in each school and shared it across so that resources could be shared across make a buy one set and it meant juggling the timetable so that for instance, if we got some new English resources that one term one time, one school would use these resources And the second term, it would move across so you can share your staffing, you know, if you've got, educational support staff who have got some capacity within their contracts, we find lots of schools, have them on nearly full time contracts, which aren't required, you know, can that be utilised in a different way? You know, what is it you can do with your premises? Are you in town center that you could rent out on a Saturday, your premises, these are small things, but they are things that will work. And if you want to look at raising income, there are companies out there that will do it for you and will support you through it, because it's not one person's responsibility. You've just got to start looking at the wider picture and where you can make savings and where you can support yourselves across different schools. 

Catherine: I would add to that to take staff with you to have those early conversations, to share the budget position, because actually you often find some of the solutions come from the staff themselves. And actually people might be thinking about flexible retirement or you know, that there's various things that they want to consider. And actually the solutions are sort of within your your gifts. So I think, again, not being afraid to have those difficult conversations and being honest about the budget.

Lisa: Absolutely. And that's one of the things we advise you know, if we recognise they’re overstaffed, I always say speak to your staff informally first, explain the budget, show them the budget every year you set it. There's always somebody out there that took the job and was five days a week but they don't really want to work five days a week. And if you need some specialism, do you need to employ a full time member staff or can you get that specialism from another school within the area? 

Catherine: Well Lisa look, thank you for lending us your time and your expertise. That's been really, really helpful Hopefully you found the podcast really helpful as well. If you did, please like and subscribe and if you've got any questions, leave a comment and Lisa and I will gladly answer.