academies are here to stay

By Giles Orr, CIPFA Director, Head of Academies

Regardless of the makeup of the next government post-election, it’s certain that the academies sector is here to stay and grow.

What form that growth takes is subject to political preferences, with the Conservatives leading on free schools and Labour threatening to scrap them. The Lib Dems are remarkably quiet on the subject, but all three major parties have at least promised to ‘protect’ school budgets (albeit in ‘flat cash’ form).

There won’t be a battleground over academies, as the parties are too close together (with the exception of the Greens, who would abolish all academies), but the future shape of the sector will raise some symbolic and real issues.

Currently, there are 4,500 academies, roughly split 50:50 between secondaries and primaries. 53% are in sponsor trust ‘chains’ of more than one school – a rising percentage as converter academies find it necessary to work with experienced chains and others have realised the need to join forces with other schools for academic and financial reasons. The corollary of this is the makeup of schools that are not currently academies – approximately 1,000 secondaries and 14,700 primaries. Further growth in academy numbers will, by definition, come from the primary sector, who are usually smaller in size and less financially robust than secondaries.

In the medium term, it’s possible that schools won’t have a choice about becoming academies, as local authorities will no longer be able to support a dwindling number of smaller primaries. Some authorities have already advised all their schools to consider the academies route, and more may follow. Regardless of whether conversion to academy improves standards (‘inconclusive’ was the view of the Public Accounts Committee in January), there may be a rush of such conversions over the next few years, driven either be necessity or compulsion. It is evident that these schools would find it difficult to stand alone, given the additional overhead requirements of running an academy, and absorption into an existing chain may be the only viable option. In addition, it’s not clear that the funding body / regulator, the Education Funding Authority, has capacity to potentially increase its oversight fivefold, and may have to content itself with the role of a payments clearing house.

The diminution of oversight and regulation in the sector does lead to potential concerns, as recent well-publicised failures in governance could point to underlying weaknesses in governance and financial management. This isn’t to say that the majority of schools are weak in this area, but light touch regulation has already demonstrated that failures can happen. Leaving the checks and balances to the external auditors (at a current total sector cost of £24m) is fraught with variations in quality (at last estimate, there were 250 different audit firms providing external audit services to academies), and a ‘race to the bottom’ over fees will do nothing to raise the standard of advice and scrutiny that will be applied.

Given that future ‘flat funding’ will actually result in significant real-term reductions in discretionary spending (as it’s not just inflationary effects that will reduce the relative income of schools, but also the additional costs such as pensions, performance related pay and rising National Insurance payments that will accrue in the near future), a potentially reduced regulatory regime and an expanding sector based on smaller and more fragile schools, academies may well be here to stay but in what form and at what risk?