Academies programme cost £1 billion more than anticipated, says NAO

Janet Downs's picture
£1 billion is the estimated additional cost to the Department for Education (DfE) of expanding and operating the Academy Programme, says the National Audit Office (NAO) even though the DfE has reduced the estimated additional cost per open academy (excluding transition costs) by 53% between 2010/11 and 2011/12. The DfE spent £8.3 billion on the Programme from April 2010 to March 2012 - £1 billion of this was additional cost.

The NAO’s 2010 Academies report (see faqs above) found that many academies were performing impressively. However, it warned that this performance, which was not uniform, couldn’t be used to predict the future performance of the academy model. Expansion “would increase the scale of risks to value for money”. It now concludes the DfE was “unprepared for the financial implications of rapid expansion”, the funding arrangements hadn’t operated as predicted and this “rapid cost growth” put pressure on the DfE’s finances requiring it to shift funds from other budgets to manage risks.

It’s too early to say whether academy conversion will raise results, the NAO says. It will return to this in the future and ascertain whether the programme was value for money.

That’s the focus of this report – value for money. But the NAO’s research didn’t include capital expenditure nor assess the impact on local authorities’ finances and services.

The NAO found the most common reasons for becoming academies were:

• obtain greater freedom to use their funding as they see fit (78 per cent);

• obtain more funding for front-line education (77 per cent); and

• be able to innovate in raising educational standards (65 per cent).

An earlier survey by Schools Network and Reform also found that 78 per cent of schools converted because they thought they’d receive additional funding. So, did converter academies benefit from receiving that portion of funding previously retained by local authorities (LAs) to pay for LA services? The NAO found that converters have experienced increased costs in some areas, such as those related to academy status, and decreases in others. Nearly half, however, felt “less free from bureaucracy” than they’d expected.

Although only 1% of academies are thought to be at financial risk and more academies are complying with “basic good governance” than in 2010, the NAO warns that failures would risk the reputation of the Programme. It believes the potential for risk will increase when “satisfactory” schools convert although it recognizes the DfE is attempting to balance the conflicting pressures of “strong stewardship of public money “and “light-touch” oversight.

The NAO found it’s not yet possible to compare financial data of academies and maintained schools - individual academies didn’t always report. The DfE had published principles for assessing value for money in schools but a more detailed framework for academies was still being developed.

Although it’s estimated that 48% of secondary pupils attend academies only 5% of primary pupils do so. The DfE originally forecast that around 600 primary schools would convert in 2011/12 but the actual number was 325. It appears, then, that primary schools are not rushing to convert. This is probably why the DfE is enforcing academy conversion. The NAO says the DfE is creating over 300 new primary academies from [allegedly] underperforming schools: the DfE will “stimulate the supply of sponsors for primary academies” by offering an extra £40,000 over the £25,000 conversion grant. This is expected to “make the sponsor pipeline more predictable”. It also adds £12 million to the cost of the Academy Programme.

Commenting on the NAO report, a DfE spokesperson said, "We make no apology for the fact that more schools than even we imagined have opted to convert, and no apology for spending money on a programme that is proven to drive up standards and make long-term school improvements.

The spokesperson ignores the fact that most schools did it for the money, brushes aside the inconvenient truth that academies don’t perform better than comparable schools (see faqs above) and other initiatives, such as the City Challenge, were more successful than the sponsored academy programme.

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Rebecca Hanson's picture
Sat, 24/11/2012 - 09:27

Clearly a big chunk of the £8.3bn is money which would have gone to schools through the LA route had they remained withing LA control.

But how much isn't? What has been the increase in costs and how much does it look like it will be year on year?

Janet Downs's picture
Sat, 24/11/2012 - 10:06

Rebecca - the NAO found that "some £350 million" of the £1 billion "was money the Department was not able to recover from local authorities to offset against academy funding."

The DfE said the "additional cost per academy" would continue to reduce but note the word "additional". This is still expenditure which the DfE didn't expect and didn't budget for.

The NAO concluded: "The rapid increase in the cost of the Programme has led to ongoing pressures on the Department's wider financial position. It has had to transfer funding from other budgets to stay within its overall spending limits while maintaining the pace of the expansion."

So money has had to be taken from other budgets to balance the DfE's books. And for what? So that schools can change their structure and supposedly benefit from extra "freedoms". But few schools will deviate from the national curriculum because Ofsted will judge them on their delivery (particularly in primary schools - see my thread about ex-HMI Colin Richards' warning about the proposed primary curriculum) and few secondary schools are unlikely to opt out of EBacc subjects because this would affect league table position unless, of course, schools heed Geoff Barton's call and choose exams which best suit their pupils irrespective of whether these exams appear in league tables.

And heads didn't convert for these "freedoms" - the main reason was the money.

Janet Downs's picture
Sat, 24/11/2012 - 10:12

What I found incredible in the NAO's survey of academy heads was that nearly half of them felt “less free from bureaucracy” than they’d expected. Did these heads really think they could take on the extra administrative and legal burdens of being an academy and be able to reduce red tape at the same time? If so, they were naive at best and incompetent at worst. It doesn't augur well for good governance of their schools if they underestimated the extra work involved.

Perhaps in the future it will be the heads that didn't immediately jump to convert who will be regarded as acting wisely and with due diligence.

Rebecca Hanson's picture
Sat, 24/11/2012 - 10:23

The issue of allowing schools and teachers more professional freedom is a huge one in education.

Gove correctly identified a huge need for progress in this area.

He then created a story that this meed would be met by creating more free schools and academies. This was very clearly never true as creating free schools and more academies would not address the root causes of the problem.

It's like saying - look at all those people - they are starving - I'm going to spend millions and millions of pounds of public money on bricks so they can build houses. It's completely ludicrous and no-one would believe it if you didn't have the press on your side and the power to get rid of anyone who told the truth.

johnbolt's picture
Sat, 24/11/2012 - 11:40

Why has the NAO not addressed the basic question of fairness? Have academies been funded more generously than maintained schools? Every anecdote from schoolls says they have but the DfE asserts otherwise. The Public Accounts Committee needs to get to the bottom of this.

Janet Downs's picture
Sat, 24/11/2012 - 12:30

johnbolt - it looks as if Margaret Hodge of the Public Accounts Committee is already on to this. Commenting on the NAO report she said: "Taxpayers have the right to expect a more considered and controlled approach to public spending than the department has so far displayed”

As soon as this Government came to power, Gove cut the £55 billion Building Schools for the Future programme which was intended to rebuild or refurbish every secondary school in England. Now we find that over £8 billion has been spent in just two years to change the structure of schools. This doesn't include capital costs which would likely increase the actual amount spent on academies.

Meanwhile, there are hundreds of schools, secondary and primary, awaiting essential repairs.

Oh, and don't forget the free schools programme...

Rebecca Hanson's picture
Sat, 24/11/2012 - 12:43

I don't think all that £8billion is extra expense and I don't think we should write about it as if it is.

Most of it is money which would have been spent on the day to day running costs of schools whether they were under LA control or not.

johnbolt's picture
Sat, 24/11/2012 - 21:24

Fair point. But surveys of heads show regularly that they converted because they would get more money that way. It's more than whether the department was considered and controlled - it's about whether they knowingly made sure academies got more money than maintained schools - estimates I've seen say early converters got 3 or 4 times what they needed in grant supposedly to replace local authority services. And of course when something like insurance turned out to be expensive, Gove bales them out with even more money!

Rebecca Hanson's picture
Mon, 26/11/2012 - 14:25

I got received this reply from Janet in my email as if it had been posted to this discussion. But I can't find it here. So I'll post it in as it appears to have disappeared and it's very useful:

Author: Janet Downs
The NAO gives a breakdown of the £8.3 billion as follows:

"In the two years from April 2010 to March 2012, the Department spent £8.3 billion – 10 per cent of its total revenue spend on schools – on the [Academy] Programme. An estimated £1.0 billion of this was additional cost to the Department (see footnote 1). It spent £49 million on central Programme administration, £338 million on transition costs, £92 million on academy insurance, £22 million on support for academies in deficit, £68 million reimbursing academies’ VAT costs, and £29 million on other grants. The Department also chose to spend £21 million double‑funding academies and local authorities to ensure sustainability of some local authority services, and £59 million protecting academies against year-on-year volatility in their income. A further £350 million was money the Department was not able to recover from local authorities to offset against academy funding, and which therefore remained in the local authority system."

So it wasn't for day-to-day running costs but for financing the Programme ie changing the structure of schools.

(It's from 4:34pm 25/11/12)

Rebecca Hanson's picture
Sun, 25/11/2012 - 09:56

Listening to heads at the time they also felt very highly pressured from above to convert without consulting.

It's hard for a head who isn't able to consult to opt for a cut in budget which will force them to get rid of staff.

Even without the pressure from above many schools simply didn't have the resource to properly consult.

Some schools near me did consult and this is what happened:

Janet Downs's picture
Mon, 26/11/2012 - 15:58

Rebecca - As soon as I posted the above I realised I'd got my Maths wrong (as you can see). The £49 million for this and the £338 million for that and so on doesn't add up to £8.3 billion. However, I'd pressed the submit button. I trashed it within seconds (probably at 4:35pm) and that's why it disappeared.

Rebecca Hanson's picture
Mon, 26/11/2012 - 20:55

Well I thought it was a great post.

It indicates that in the first two years academies have cost us over £1bn, that we can expect ongoing costs of around £0.5bn a year and rising if we keep converting at this rate.

That's a lot of money and it's real costs! For what???? But the other £7.3bn isn't a real cost worth talking about.

Janet Downs's picture
Tue, 27/11/2012 - 07:50

Rebecca - my reason for trashing the post was because my argument didn't add up (literally). I was complaining that £8.3 billion had been spent on the Academies Programme overlooking the fact that much of this would have been day-to-day running costs.

We know that £1 billion was overspend: transition costs, admin, support for academies in deficit(!?) and so on. The £7.3 billion was for the rest of the programme. But how much of this was actually day-to-day costs of existing academies? There were 203 sponsored academies in May 2010 - the number of academies has now increased ten-fold. These are mainly converter academies - some of which have only been in existence for a very short time - would have only been months old when NAO did its audit.

The NAO said that 5 per cent and 15 per cent of total schools revenue funding went to academies in 2010-11 and 2011-12 respectively. In September 2012 there were 2309 academies - this is about a tenth of all schools. It would appear, then, that a disproportionate amount of total schools revenue (15%) was being spent on academies. However, this could be because the majority of academies are secondary schools which attract more funding.

So the question remains: how much of the £7.3 billion was actual running costs and how much was expected expenditure of transition etc which, as we know, was underestimated?

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