A Guide to School Finance

We always hear about how schools are underfunded and that cuts have to be made. Twitter abounds with the tales of experienced, upper pay scale teachers finding themselves unemployable due to the fact they simply cost too much. Adverts have started to appear asking for applicants that are just M1 – 3. Decisions may be made about contracts and appointments based on salaries rather than teaching skills. Headteachers and business managers across the land are telling staff they can’t buy anything as there isn’t any money. Sometimes I have teachers who roll their eyes when I say it comes down to budget, or that we can’t have this or that, or they tell me I only ever talk about the budget (not true by the way!). It is a major part of a headteacher’s job at the moment, and while day to day it may not impact on actions taken during a given day, it is never far away from waking, and sleeping thoughts. With that in mind, here is my guide to what finance in schools is really like and how it works.

A few things to clarify though:

1) This is based on my experience with my local authority and my school. Every school is different.

2) I am not an academy, their finance systems are different, and funding slightly too.

3) I am by no means an expert on this, but I know enough to get the job done!

4) This is primary focussed.

5) I am bound to forget something.

6) I’d be lost without my school business manager

So, here are a few of the headlines and basics:

The Financial Year

The financial year for LA schools runs the same as the tax year, April to April. This can make things difficult when it comes to setting a budget as you don’t know which staff will still be there in September and who you will be able to recruit. It also means that a lot of schools have a ban on ordering from Feb half term onwards as the end of the financial year is coming. This can cause resource issues!


School income comes from the DfE in the main. This is split up into various pots of money. Their funding formula can be found at https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/728273/National_funding_formula_policy_document_-2019_to_2020-_BRANDED.pdf)

The main part of the budget is made up of AWPU (Age Weighted Pupil Unit). This is why it is so important to have full schools. More pupils, more money. A pupil leaves, so does their funding for the next academic year (and possibly even some of it for the current year). This is worth £3,217 per pupil at primary. Other income which pupils may be eligible for includes Pupil Premium (£1320/pupil), low prior attainment (£1,022/pupil), EAL (£515/pupil). There is then also funding based on the deprivation factor of the school. This is banded based on the proportion of children who live in a low income household.

A school also recieves a lump sum of £110,000 per year and a devolved formula capital grant (DFCG) which has to be spent on building work or ICT hardware.

As well as this there are other grants that are given:

  • Sports Premium – £16,000 + £10 per pupil
  • Infant Free School Meals – £2.30 per day, per KS1 pupil
  • Teacher pay and pension – these are top up grants to cover recent rises in pay and pension contributions.
  • SEN Top up – this is extra funding to cover the hours of support detailed on the EHCP. Schools have to fund the first 13 hours themselves and then get funded for the rest.

Most of this is ring-fenced and can only be spent on certain things – for example the Sports Premium funding. Reports have to be published on how this money has been spent. Many of these are based around pupils on census day (the government count done twice a year). If you get an influx of pupils joining you after that, you will only get 7/12s of the money for them.

After this schools can then generate their own income to top up their funding. This will include PTA fundraising, parental contributions, money from lettings, income from taking on student teachers and applying for external grants (eg lottery funding).

All of this gives you your starting point for setting the budget. As a guide, my school has around 165 pupils, low FSM and low deprivation. Our PTA raise a lot of money (around £25k a year). Our total income for 2019/20 was £740,000. I have set a deficit budget for the last year.


This is where it starts to get fun. Trying to afford everything you need in the money you’ve got.

Let’s start with staffing. This is by far the biggest spend a school has. My budget at the moment runs this at about 92% of income, which is too high and the reason for my deficit. I have no option – I have classroom capacity of 24. I could be a school of 30 in each class and have to spend no more money of teachers, and I would get at least an extra £110,000 in my budget (I realise support staff costs may go up). This would solve my budget problems, but I can’t fit any more children in. The thing to remember about staffing is that teacher salaries go up each year, so it needs to planned into the budget for pay scale point rises. Also, the expenditure of a teacher salary is not just the wage. The school also has to pay National Insurance and Pension contributions. Pension contributions by the school for teachers are 23%. It means that employing a teacher at M6 doesn’t just have a salary implication of £35k it is north of £45k. Thanks to @clemcoady for the chart below:

This applies for every teacher, so the budget soon gets used up. Once you add in the on-costs for support staff (TAs, office staff, caretakers, midday supervisors, cleaning staff) as well, it can soon spiral and become a very large part of your budget spent.

This is why upper pay scale teachers become expensive. A starting salary of £40k soon pushes an actual cost of £50k to the school. The quality of the person needs to be balanced against the cost. Swapping a U1 for an NQT is a significant saving for schools and is part of the reason that many schools do it.

All of these people need insuring as well. This can also become very expensive. Insurance to cover sickness is the main one, but also maternity leave and other absences. What you add into this cover changes the price hugely. If you want to add stress as a coverable part of the policy, the price rockets. Maternity leave cover changes significantly based on the age of the people you are covering. We can only afford to cover people who would need a supply if they were off – eg teachers only.

There are other staff related costs too – office staff are entitled to a paid eye test, they may claim transport and other personal expenses (not all do, but it is an entitlement). DBS checks need paying for, as do placing advertisments (£150 per ad in my LA). Each of these are small costs, but soon add up.

Another large area of expenditure is buy back from the local authority. Academies can choose their suppliers, so can shop around, but LA schools are less able to do this. We have to buy back, HR services, finance services, school management system and support (SIMS), employment benefits (eg occupational health), legal support. This can cost per pupil as well. This are essential servies that you are forced into buying from one provider.

Energy is also the same. Gas and electricity take up a large amount of spend. Buildings and maintanance need a chunk of money set aside as well. Grounds maintaince (eg lawn moving and site maintainence) also comes into it. Photocopier’s are usually on lease so there is a monthly cost as well as a per copy cost. Colour copies are can be 4p per sheet. Soon mounts up. School meals needs to be paid for, as do school trips, but these are usually recoverable costs. Everything that we have, has to be paid for. The money very quickly drains away, and notice that we’ve not actually got onto provision for any of the children yet.

Finally we get onto resources. Books, glue sticks, ICT rescources and equipment. These are essentials, but by the time we have budgeted for all the above there is very little money left for them. We give all of our PTA money towards things like this – buying pencils and sharpeners and glue. There was a time this was saved for luxury items. Espresso, Mathletics, the website all come with annual costs picked up by our PTA in reality.

It all means that money is tight everywhere. When something goes wrong there isn’t money in the bank to fix it. One of the screens in a classroom broke this year. Where do I find £1500 to replace it? It’s so hard. Spending on one unexpected thing takes money away from something else. It’s an impossible balance, and one that unfortunately often doesn’t have the children at it’s heart.

My LA come and meet with me because we have a deficit. They agree I’m not overspending, and that I can’t get more pupils. What am I supposed to do? I cant get more money in and can’t spend less? Getting out of deficit becomes very difficult. Part of the problem is that it is imaginary money. It’s isn’t like running your own bank account (although for academies I believe it is more like this).


My governors get budget monitoring reports 6 times a year. They review and question how and why decisions have been made. Contracts and spends over a certain amount have to be run by them. They are there to ensure the school is being financially repsonsible and not leaving beyond it’s means without good reason. They need a firm understanding of school finance, and from what I have heard it is very different from commercial systems. They can be amazing though. Different eyes, experiences and points of view become very helpful indeed. Forecasts and reviews have to be submitted to the LA every quarter so they can make sure we aren’t on course to have a nasty surprise at the end of the year.

To sum up…

Budgets are hard. They are numbers on a page and some see them just as that. They don;t think of the stories attached to it. The finance team in my LA are not educationalists – they just see the numbers. I have a fierce fight between what is best for the children and what we can afford weekly. I try to never compromise on the standards the chidlren get in the classoom. If they drop, pupils numbers drop and we have even less money. Best teachers, best support we can get and then cut everything else. I’m reaching the point where I may not be able to this though.

Much like the NHS, schools are underfunded and don;t have enough to do their basic job. I write about why here (https://secretheadteacher.org/2019/07/26/paying-lip-service/). We just don’t have enough to make the difference we know we can at times. It’s hard, it can keep me awake, and I don’t think I have the answers.

Published by @secretHT1

Primary HT. Using this as a space to write honestly and freely about the state of education currently.

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