Schools warned against ‘over reliance’ on reserve cash to balance books

Nicholas Thomas, Local democracy reporter

A new report has warned that schools in a Welsh city have an “over-reliance” on past savings to balance their books.

A mid-year health check of Newport council’s business shows most city schools “are now operating with in-year deficits” and are depending on “historic surpluses in order to set balanced budgets.”

The report to cabinet members warns the reliance on reserve cash is “not sustainable,” creating an “increased risk” of schools ending the year in the red.

As reported previously, the latest public figures show 53 of Newport’s 56 state schools are reporting in-year overspends.

This situation is expected to improve throughout the remainder of the financial year, but two schools remain forecast to reach the end of March in the red.

However, the figures show many schools will spend large chunks of their surpluses.

In some cases, schools are predicted to spend more than three quarters of their surpluses this year, and in other cases schools could be left with less than £10,000 in reserve for future years.

Cabinet members were reassured in November that schools tend to improve on their mid-year forecasts thanks to various grants.

But the latest estimates have prompted an opposition councillor to seek guarantees schools were receiving enough money.

Referencing 2021 census figures, Cllr David Fouweather asked: “The population of Newport has risen by 10%. Therefore, has the local authority education budget increased to allow for this?

“How much extra in percentage and money terms has been added to the education budget for schools, bearing in mind the dire situation that 53 out of 56 find themselves in?”

Cllr Deb Davies, the cabinet member for education, said the education budget had increased by 34.9% over the ten-year period the census covered – equalling an extra £27.5 million – and the council considers increases in pupil numbers when it calculates school finances.

“Cabinet has not made any decisions around use of council funding for 2026/27 – however, all pupil growth was accounted for in the funding provided to schools this year,” added Cllr Davies.

She said two of the city’s schools ended last year in a deficit position – compared with an average of 14 schools in the red in other parts of Wales.

One of the schools to end last year with a negative balance is now forecast to end this year with a budget surplus, while the other “is being monitored and supported to resolve its forecast deficit.”