The Expensive Obsession with Academies

Local Schools Network's picture
We reproduce this analysis by Peter Downes, an experienced headteacher and Liberal Democrat Councillor. It is based on the recent National Audit Office report on academies, which Peter sees as "an astonishing indictment of a policy initiative that got completely out of control".

Within weeks of coming to power in May 2010 the Education Secretary, Michael Gove, rushed through an Act encouraging ‘outstanding’ schools to leave their local authority and convert to become ‘academies’. It was alleged that this would give them greater freedoms, in particular the freedom to use their budget more flexibly. He was developing the policy started under the previous Labour government which had set up sponsored academies in areas of deprivation so that failing schools could be closed and re-opened as academies.

The financial arrangements were that these new academies, (called converter academies to distinguish them from the original sponsored academies),  would continue to receive the funding they would have got by being a local authority (LA) school, together with an additional grant to allow them to buy in the services they would previously have received from the LA. This extra grant is known as the Local Authority Central Spend Equivalent Grant (LACSEG).

Some schools expressed an interest quickly and were given their draft LACSEG figure. They could hardly believe what they were seeing.  The grant, together with a one-off grant of £25,000 to help with the transition, and other grants to help with legal and insurance costs, were giving schools a significant net bonus.

The size of the ‘bonus’ i.e. more money than they needed to replace the services they had lost, varied from area to area and depended on the size and catchment of the individual school. A great deal depended on how their Local Authority completed the official returns to central government (Section 251 returns) as these were the basis for the calculation of the LACSEG. Size of school made a big difference because the LACSEG was allocated on a per pupil basis but the cost of the extra services needed (e.g. extra administrative assistants or bursars) was not number-related. Two large secondary schools had a LACSEG of over £1 million. The catchment mattered because a converter academy would get a pro rata share of the money spent by the LA on pupils with social and behavioural problems, for example, but would not need to spend that because it had a lower than average proportion of pupils needing extra expenditure. Given that the option for conversion was originally offered to outstanding schools only, most of those were serving areas of relatively low deprivation and few social or behavioural needs.

It is difficult for any headteacher to turn down the offer of extra money, especially at a time when the general level of funding for education is being pegged back. News of the LACSEG bonus spread quickly round the headteacher networks and, not surprisingly, many could not resist the temptation and applications came flowing in. By September 2012 just over half of secondary schools had converted to academy status.

This rush of applications took the DfE by surprise. This has meant that the DfE has an overspend on its budget of £1 billion for the two financial years 2010 – 2012. This overspend is explored in detail in a report published by the National Audit Office on November 20th, 2012. The report is called ‘Managing the expansion of the Academies Programme’ and can be downloaded from .

The NAO report states (para 1.7): ‘The Department initially underestimated both demand and costs. Its Impact assessment accompanying the Academies Bill assumed that 200 schools would convert in each of the first four years of the expanded programme. While 195 schools converted in year one (2010-2011), 1,103 converted in year two (2011-2012). The Assessment contained simplistic assumptions about some funding elements and omitted other costs, including sponsored academy start-up funding.‘

Would-be academies have to deal directly with officials in remote government offices, whether the DfE itself, or the Young Persons’ Learning Agency, now transmogrified into the Education Funding Agency (EFA) so there was increased bureaucratic pressure and cost at the centre. In addition, the DfE had to pay up the promised  excessive LACSEG.

Although the NAO report is written in the neutral style expected of auditors, it amounts to an astonishing indictment of a policy initiative that got completely out of control. Encouraged by the apparent popularity and ‘success’ of his policy, the Secretary of State rejoiced in his achievements and instructed his officials to divert money from other budgets in order to keep the bandwagon rolling.

What is even more astonishing is the omission from the NAO report of any reference to the government’s policy statement to the effect that ‘there should be no financial advantage or disadvantage for a school converting to academy status.’  The government has clearly failed to fulfil that commitment. This ‘blind spot’ became even more apparent when the NAO’s report was considered by the House of Commons Public Accounts Committee, chaired by Margaret Hodge, on December 2nd. The Permanent Secretary at the DfE was challenged to confirm that converter academies had indeed had a financial advantage and he denied it. Later in the session, when pressed further, he modified his answer to say that some may have had an advantage but others were worse off so it more or less evened out overall. What puzzled onlookers was this: did the Permanent Secretary not really know the truth of the situation, or was he under instructions from his boss to deny it?

Given the generally parlous state of government coffers, the obvious question is: where was the extra money found? The DfE drew on £105 million from a ‘contingency fund’   and redirected £160 million from ‘previously allocated discretionary budgets’. The NAO report does not specify who lost out from losing their allocations. They took £95 million originally allocated to school improvement ‘on the basis that sponsored academies were now its main vehicle for school improvement.’ What this fails to recognise is that the money was going mainly to converter academies, not in need of improvement because only outstanding and, later, good schools were allowed to convert.

The Treasury kindly stepped in with an extra £200 million though the full amount was not actually required. The overspend is expected to continue: in 2012-13: £400 million has been transferred to the Programme, including £100 million from lower-than-expected 16-19 participation and a similar amount intended for intervention in underperforming schools. More will need to be found from underspends on other budgets.

Part of this continuing overspend will arise from the decision to protect the LACSEG of academies at 90% of the previous year’s figure. This will happen even though the true LACSEG in many LAs will actually be much smaller in future, now that they have got a better understanding of which lines of expenditure should and should not be included in the Section 251 return.

The calculation of a LACSEG separately for each of the 152 authorities has eventually become intolerable for the EFA and so, from 2013-14, they are proposing to have a national rate for all academies, irrespective of the level of funding available to their LA. This national rate, renamed the Education Services Grant (ESG) will be deducted from the general grant given to LAs for their educational responsibilities. This is going to introduce a new raft of inequities. LAs which receive a low level of grant and have a low level of taxation and so spend relatively little will find themselves out of pocket if they have a large number of academies. A typical example is Cambridgeshire:  in 2012-13 Cambridgeshire would have spent £4.895 million on providing education services for its 74,543 pupils if they had all been in maintained schools. This equates to £66 per pupil and so would be the relevant figure for the 13-14 year. However, DfE officials are proposing, at the time of writing, a nationally standardised Education Services Grant figure of £160 per pupil in academies. In Cambridgeshire this will remove £4.6 million from the LA’s general grant as there are currently 29,120 pupils in academies. The effect of this is to remove from the LA far more than they would have spent in relation to pupils in academies (and almost as much as would be spent on all state-funded pupils). Consequently Cambridgeshire County Council will have to make off-setting service reductions and savings to the tune of £2.7 million. This could mean, for example, that they would no longer be able to

  • manage the strategic capital programme developing new schools for the growing population in Cambridgeshire…..

  • continue to provide home-to-school transport for all the children who are transported to special schools

  • provide education welfare services for the remaining maintained schools

Of course, they can’t actually do that because these services are statutory so cuts will have to be made elsewhere in the services provided by the County such as adult social care, road maintenance, libraries and youth services.  It would also mean that academies are receiving advantageous funding of an extra £94 per pupil which breaches the DfE commitment to equity referred to earlier in this article

It could therefore be argued that a national rate for the ESG should not be implemented until the full reform of education funding goes ahead in the next Comprehensive Spending Review period. Part of that reform would logically be an independent analysis of what it should cost an LA to provide a standard level of service. For 2013-14, academies should receive the actual ESG appropriate to their LA and not be protected at 90% of their previous rate.

So, it is clear that the government is making the Academies programme its flagship policy. What does this mean for the future? The number of primary schools opting for conversion has been less than expected. This is not surprising: given the size of most primary schools, the financial advantage (see above) is not sufficient to compensate for the extra work, risks and responsibilities. To speed up primary conversion, Mr. Gove is forcing ‘failing’ primaries to convert and be taken over by academy chains or other successful schools which are already academies. This failure rate is under his control as he can set the performance benchmarks and also influence Ofsted to ‘raise the bar’ in its judgements on schools.

Everything we have said so far refers to revenue funding, i.e. what schools need each year to cover running costs. Another controversial area and still shrouded in mystery is the capital programme i.e. investment in building new schools, expanding existing ones or repairing dilapidated buildings. Here again Mr. Give has shown his hand. Having scrapped the over-ambitious Labour programme for the refurbishment of the national school building stock, he is now able to distribute largesse on the basis of bids.

In the Autumn statement from the Chancellor, delivered in December 2012, it was announced that Mr. Gove will be given an extra £1 billion which he intends to spend on free schools and academies, particularly to expand popular schools to meet parental demand. The difficulty here is that the country is facing tremendous pressure on school places in the Early Years and primary phases over the next few years. If Free schools are allowed to develop, as they have been so far, on the basis of promoter enthusiasm irrespective of the need for places in a particular area, that could fail to meet the basic demand for school places.

The expansion of good schools to meet popular demand seems obvious, especially to those who see schooling as a marketable commodity rather than a basic right. If successful academies are allowed to expand to meet demographic growth, that might make sense. If they are simply allowed to expand without demographic growth, that means that less successful schools will shrink. As a school gets smaller, it has less financial capacity to meet the needs of its pupils. Experience suggests that it is the highly motivated parent of able pupils who will exercise choice to get their children into the best schools.  That will leave the shrinking less successful schools with a higher proportion of less motivated pupils and they will find it increasingly difficult to meet their needs. So the best will get stronger and the worse will get weaker.

The National Audit Office report and the implications arising from the Academies Programme may seem to some to be a rather esoteric and technical matter. In practice, they reveal starkly the dilemma facing educationists and politicians – do we treat education as way of redressing the imbalance between the haves and have-nots by putting equity at the top of our agenda, or do we treat it as a marketable commodity by making choice, diversity and freedom our watchwords? I think we know where Mr. Gove stands!


Peter Downes was the Head of one of the first six schools in the country to pilot ‘Local Financial Management’ in 1982. He edited an account of this in Local Financial Management in Schools, Basil Blackwell, 1988. This pilot scheme in Cambridgeshire eventually led to the 1988 Education Reform Act and the national implementation of Local Management of Schools (LMS). As an active member of the Secondary Heads Association (SHA), [now the Association of School and College Leaders (ASCL)], and its President in 1994-95, he campaigned for a fairer funding distribution mechanism and commissioned a study on this from the London School of Economics (‘A Better Cake’, 1995). From 1996 – 2002 Peter Downes was the Funding Consultant for SHA and wrote and lectured widely on this topic, producing Fairer Funding, SHA, January 2000 and Moving Forward with School Funding, Croner Publications, March 2000. From 2001-2002 he served on the DES Education Funding Strategy Group. In 2004 he co-authored Formula funding of schools, decentralisation and corruption, UNESCO. Since 2001 he has been aCountyCouncillor in Cambridgeshire and has taken a special interest in education funding and local authority services. He is Vice-President of the Liberal Democrat Education Association and a substitute member of the Local Government Association CYP Board. He writes in a personal capacity.




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Neil Moffatt's picture
Thu, 27/12/2012 - 22:47

Reckless behaviour to fuel a pet project not founded in education research.

That is the essence of this well researched and written article. Rather than be taken to account, the DfE has managed to acquire further fuel for its ambitions - a reward when a punishment would be more appropriate.

That the growing needs of primary schools is casually ignored in this race to academise schools is an avoidable casualty that serves as a grim symbol of this recklessness.

Who is sanctioning this recklessness in a time of supposed austerity?

Janet Downs's picture
Fri, 28/12/2012 - 10:28

A survey in early 2012 found that a perception that schools would receive extra money was the most popular reason for academy conversion. But the needs of other schools, particularly small primaries, have been ignored in this unedifying race to claw back that small proportion of the budget retained by local authorities for back-room services. These LA services were not just "red-tape" or bureaucratic "control" - they included essential education welfare, transport, peripatetic music provision and so on. These services are at risk when sufficient schools opt out.

But what is most incredible in this sorry saga is the lack of outrage about the overspent £1 billion.

Neil Moffatt's picture
Fri, 28/12/2012 - 13:40

There does indeed seem to be a general passive acceptance of bad education news. The audience has been worn down and is too wary of losing their jobs to respond.

If I were to protest about this overspend and the astonishing additional £1Bn awarded, what might be my first line of attack? I am self employed with time on my hands to take action!

Rebecca Hanson's picture
Fri, 28/12/2012 - 14:03

Join a mainstream political party and join their education association. See what's going on and if you can get involved.

Go to spring conference if you can, attending whatever sessions or meetings their education association has and spend talking to and getting to know the people who are already involved. See if you can get involved in their activities or get onto their committee. Then you can really start to help to get positive things done.

Because the normal professional bodies which consult on education policy have been shut down/destroyed, the forces within our political parties are crucial at the minute but they are woefully under-resourced. Everyone is saying 'why aren't the politician's listening?' but there is nobody there to listen. Nobody wants to be the one doing the listening. Most people involved in these organisations have complete 'other lives' and are trying to do their best in their spare time (they don't have any) and without any resources. They're wonderful people to be around and its liberating and inspirational to work with them.

Its part of the bullying thing that people working in education don't want to get involved and also feel they mustn't put their heads above the parapet....

Janet Downs's picture
Fri, 28/12/2012 - 14:16

Neil - welcome to the site. One thing you can do is to keep visiting and commenting (that's actually two things). Also let other people know about LSN.

Another thing you can do is to write to your MP and complain about the overspend. It's easy to email your MP via Write to Them:

If you're a parent with children at school you can get involved there either through the PTA or by being a governor if there's a vacancy for a parent governor.

Neil Moffatt's picture
Fri, 28/12/2012 - 14:36

Many thanks indeed. This sounds great - I will pursue all lines that I can. Feel free to pass on any news to my - the site I set up as a container for my ideas and hopefully a uniting catalyst. My sister is a Maths teacher and the latest bullying she has experienced was by the head asking her to post fraudulent results. She is too protective of her job to whistle blow. Bullies rely on passivity.

Neil Moffatt's picture
Fri, 28/12/2012 - 14:37

Many thanks to you also. I will do as you say.

Neil Moffatt's picture
Fri, 28/12/2012 - 15:04

Thanks. I will tell her.

I have written to my MP about another matter - living in Wales, it appears that my right of address does not extend to English MPs. I contacted Jenny Willott (with whom I have spoken in person in the past, and who is very receptive) regarding the Welsh school banding, declared by the Welsh Government as NOT a league table equivalent, but with no logic to reinforce that declaration.

Neil Moffatt's picture
Fri, 28/12/2012 - 15:34

You are very kind to help out.

My locale obviously limits my range of actions, but I am English and still care enough about what is happening in England to want to take action. I do read the TES, and find the articles generally very good indeed. I will read the articles you referenced. All good grist to the mill ...

Neil Moffatt's picture
Fri, 28/12/2012 - 15:42

Since all main parties are contaminated with much the same gross misunderstandings about education, is the choice of which one to join relatively arbitrary?

Janet Downs's picture
Fri, 28/12/2012 - 14:52

Neil - if your sister is being coerced in this way she should contact her union. If she's not a member then she should join one.

Janet Downs's picture
Fri, 28/12/2012 - 15:25

Neil - I didn't know you lived in Wales. The Coalition's educational policies don't apply over all of the UK. Scotland, Wales and Northern Ireland have devolved responsibility for education. The academy conversion programme, for example, doesn't apply outside England.

I know that the banding system in Wales is controversial. See TES article:

And banding recently provoked this heartfelt plea on this site by a Welsh student:

If you don't already do so, reading TES will keep you up-to-date. You can read a selection of articles online and search for particular topics. For example, you would be able to see all online articles re Wales if you typed Wales in the search box and selected magazine. You can then select a year if you wanted to or just scroll through the lot.

Janet Downs's picture
Fri, 28/12/2012 - 15:53

Neil - your local MP sits in Westminster so you can still ask a Minister questions via your MP about non-Welsh matters. You could, for example, ask your MP to ask Michael Gove to justify the £1 billion overspend (having given your objections first).

Your MP would then forward your letter to the DfE. If you don't receive a reply in a reasonable time then ask your MP to chase it.

Neil Moffatt's picture
Fri, 28/12/2012 - 15:58

Of course - I should know as she did this for me before when I wanted to ask why supermarkets were allowed to sell alcohol at below cost price. The answer was lame, to say the least, but at least the route is indeed there. Thanks!

Rebecca Hanson's picture
Fri, 28/12/2012 - 17:35

I would go with your deep political instincts Neil. Mine were anti-parties owned by the press and pro a liberal infrastructure of state so I'm on a committee with Peter Downes and others who are of a similar caliber (although I had nothing to do with this article being here). It's a wonderful group to be part of.

If you're Tory join the Tories, heaven knows they need people in there!

If you're Labour join labour. They've got opposition funding at the minute so they've got to excellent people working or them. Stephen Twigg and Kevin Brennan speak well at meetings in that they don't generally say ludicrously ignorant things and they are getting out and about and doing a lot of listening but they aren't really saying much about what they would do - which on the positive side creates space for people to influence their next manifesto.

If you get into politics you'll probably get involved in your local branch as well and that's been really interesting for me.

You could also get involved in your local union committee - they're probably short of people too - if you're in a union.

If you join a party you could always say decided to give it a year and see if feel it's worthwhile or not and then leave and join another if you think it's better or stay away from politics if you then think it's pointless. Being inside the Lib Dems has shown me that what's going on is absolutely nothing like it's portrayed to be and I've found that liberating.

Fixing things is not easy. You can't do it on your own.

Neil Moffatt's picture
Fri, 28/12/2012 - 17:38

Thanks. I have, for now, joined the Labour party. I presume that does not stop me joining other parties since there is overlap across them anyway. I will get involved as much as my health allows (headaches and excessive tiredness do intrude).

Rebecca Hanson's picture
Fri, 28/12/2012 - 17:54

"I presume that does not stop me joining other parties since there is overlap across them anyway."

Does anyone know about that? I don't and would like to.

"headaches and excessive tiredness do intrude"
I'm sorry to hear about that Neil. I hope you feel better soon. It's a terrible time of year for tiredness. Have you seen a doctor and got properly checked out? If not maybe try a sunbed for some vitamin D? :-)

My main concern about Labour is their lack of understanding of Web2.0 capacity to overcome the previous barriers to professional freedom created by assessment. This is a problem which runs through all the parties because Gove shut down and disabled our expertise in technology in education but at least I can keep an eye on it in the Lib Dems. I have a blog on it which starts here if you're interested.

Have Labour got an education association? If you want to stay in touch with their education policy development that would be the think to join then you'll get notices of what's going on so you can get involved as and when you feel up to it or things are not to far away. I can't believe the Lib Dems are having their next conference in Brighton again! It's such a blooming long way from West Cumbria when you've got young kids.

Please do let us know how you get on with Labour. As you say there's massive overlap and those of us who are trying to ground theory in reality need to support each other. There are far to few of us.

Neil Moffatt's picture
Fri, 28/12/2012 - 18:01

Many thanks.

My tiredness and headaches has plagued me for 18 years, but thanks for the concern.

I sat Computer programming 'O' level in 1973 - we were taught not just Basic but assembly language. It propelled a number of into IT. One class friend recently became head of IT for the John Lewis partnership, another head of IT for Husky Oik in Canada. I spent 12 years at IBM in Portsmouth and continue to program to this day. So I can help on web matters - to a degree- my own Education reform web site uses some Javascript to reasonable effect, so that the site is not a blog but something more dynamic.

In Finland, the political parties appear to see the merit in an ongoing, research based foundation to education policy. There is no reason in principle that this could not happen here, except that the Finnish nature is very different from ours, being more egalitarian. I look forward to the next steps - 7-10 days before I receive my welcome pack.

Rebecca Hanson's picture
Fri, 28/12/2012 - 18:22

This is the type of education I joined teaching to provide Neil.

One of the people working with labour at the minute is Tim Brighouse. If you get the chance to attend a session with him do grab it if you can. I think you'll love it.

Rebecca Hanson's picture
Fri, 28/12/2012 - 12:33

This is an excellent article however it and the subsequent comments so far ignore a key dynamic of the academy conversion process which was the extreme level of bullying involved.

I assume this is ignored because it is so difficult to quantify and precisely describe and because nobody has properly yet researched it but I think that research should be done as soon as possible.

The cultures of this government was, and to a significant extent remains, that if you are not entirely with Gove you are an ignorant socialist ideologue who needs to be removed from the system. Daring to do something like consult on academy status rather than just pushing it through without consulting was seen as being likely to put you into the latter category.

What do you do when you are a good head of a school in very difficult circumstances and you know that if you annoy the government you both you and your school will be punished and nothing positive will be achieved? Key examples like Downhills were used to make it clear to schools what would happen. Those who tried to take legal action found they had no rights. People who spoke out even mildly lost their incomes and their reputations and were ostracised and systematically discredited. You don't have to do it very many people for the rest to get the message that they have no right to think about reality let alone to speak about it.

Janet Downs's picture
Fri, 28/12/2012 - 13:03

Rebecca - you're correct in highlighting coercion. The disgraceful treatment of Downhills school and the ruined career of its head illustrate clearly what will happen when schools resist. This was implicit in this thread which describes how a community school governor admits that the school jumped before it was pushed.

And a BBC documentary revealed how the DfE uses intimidation to force academy conversion on to reluctant primary schools:

At a local level, schools may fear they have no choice when the number of academies threatens the viability of LA services. And counties could follow Lincolnshire's lead by relinquishing all responsibility for their schools and advising wholesale conversion.

Rebecca Hanson's picture
Fri, 28/12/2012 - 14:06

I think the bullying may be a more influential factor than the money.

Neil Moffatt's picture
Fri, 28/12/2012 - 16:19

I have written to my local MP a letter to be forwarded to the Coalition Government regarding the £1Bn overspend. See the 'Reform news' part of my web site (click on my name in blue).

Jane Eades's picture
Sun, 30/12/2012 - 13:49

A bit ago I did a series of Freedom of Information requests to schools in Suffolk to find out insurance costs for schools pre conversion and post conversion to academy status. The results can be found at
The savings for Suffolk County Council were minimal. One difference was that the SCC did not insure its buildings because of the number of schools, whereas an individual academy had to.

johnebolt's picture
Mon, 31/12/2012 - 12:07

Hi Neil - you might like to know that there is indeed a Labour education association. You can find all about the Socialist Educational Association, including how to join, at There is an active branch in Wales that I know would be delighted to hear from you. You can also follow the SEA blog on current issues at

Neil Moffatt's picture
Mon, 31/12/2012 - 14:04

Many thanks indeed for helping out here. Web sites like the LSN are fabulous community vehicles. I will pursue and reply either here or via the SEA blog.

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