The Revenue Balances FAQ

It’s always fun to see the silly Revenue Balances argument raising it’s ugly head again. The DCSF are obsessed with what they see as a huge wastage in devolved funding, where schools don’t spend every brass farthing that is devolved to them. Some schools have, over the years, managed to underspend the money that the government allocate to them, via the loacl authorities. And because the ministers are under pressure from the treasury to reduce spending, they find all sorts of red herrings and excuses to maintain their argument for ever larger budgets.

So I decided it was necessary to explode some of the myths, and put everyone straight. These FAQs are the result. Enjoy.

What’s a Revenue Balance when it’s at home?

Good first question, but unfortunately it’s at the heart of the myths around the subject. There seems to be a modicum of disagreement about the definitive definition. In general terms, a Revenue Balance (in English schools terminology) is the amount left over in a school’s budget at the end of a financial year.

What is so complicated about that?

Well, lets look at an example. Suppose an average sized primary school receives £500,000 for its annual budget, and during the year spends £500,000, what would be it’s Revenue Balance?

Thats easy. It’s £0 isn’t it?

You would think so wouldn’t you. Actually, it depends on how much they started with. Suppose they carried forward a balance of £50,000 from the previous year, then the Revenue Balance would be £50,000.

That doesn’t make a lot of sense, does it?

You’re quick, you are. And that’s not the only thing that doesn’t make sense. What the DCSF are getting stressed about is not that schools are not spending the money devolved to them each year. They’re also peeved if schools don’t spend everything left over from last year. And that’s the economics of the madhouse.

The economics of the madhouse? What on earth do you mean?

Let’s look at what has been going on with the total Revenue Balance figures per year (see table below). In his ministerial statement, Vernon Coaker suggest that about £500 million of that is excessive.

2000 £740,691,354
2001 £1,085,602,004
2002 £1,256,776,093
2003 £1,192,864,397
2004 £1,325,397,369
2005 £1,532,855,786
2006 £1,570,348,360
2007 £1,670,198,878
2008 £1,918,768,630
2009 £1,781,973,700

But surely Vernon and his colleagues really don’t know how that balance got there in the first place. Looking at those annual figures, most of it could be leftover from previous years. If we go back to our average school (School A) above, with a budget of £500K, assuming they are a primary school, they are allowed 8% (£40K) as abalance before it becomes excessive. Let’s also assume that there is a neighbouring school – School B – which has exactly the same budget, the same staffing structure, the same pupil profile, and that coincidentally it is identical to School A in every respect except one.

Lets suppose School A has a very nice parent who has 3 businesses; one which does grounds maintenance, another which does boiler maintenance and the last which does ICT support. And this parent gives the school a really good deal in those 3 areas, saving them £10,000 per annum. In 5 years School A will have an’ excessive’ balance, at least in DCSF terms, because they have a kind and helpful parent.

I guess Vernon Coaker’s response would be that the school should have a set of optional priorities in it’s School Development Plan to spend the money on, and he’s right. Unfortunately he doesn’t have a copy of the SDP and doesn’t know what the school’s priorities are. But here is a group of people who do. They are the school’s governors. I’ll bet they know what the £50K is being kept for.

How can you be so sure?

I can’t, but I’m willing to bet my own money that in most schools I’d be right. And anyway, if the governors don’t know what the money is being saved for, then they should. It’s an indication that this school is not being managed/governed very well. But that’s a different problem, and the answer to it is not clawing back some of the excess. Instead it’s about taking back the whole delegated budget. But (un)fortunately that’s unlikely to happen.

Why?

Because that’s a response usually reserved for failing schools that tend to overspend.

Are you suggesting that there is a link between revenue balances and school performance?

Yes I am. Because I was sick and tired of hearing this uninformed nonsense coming from the DCSF, I decided this year to see if I could make a link. And I suceeded.
Using the Revenue Balance figures recently released, and all the Ofsted Inspection judgements for the last 5 years, I was able to correlate the overall Ofsted judgement against the revenue balance of the school that year.

But first I Xtabulated school phase against school type and averaged the Revenue Balance %age. Interesting to see that it is foundation schools – most of them old GM schools – which retains the lowest percentage. But there is not much in that analysis.

Phase Community Foundation VA VC Average
Middle deemed primary 7.26% 6.43% 6.52% 5.77% 6.99%
Middle deemed Secondary 5.02% 5.32% 5.00% 4.92% 5.03%
Primary 7.28% 7.48% 7.52% 8.32% 7.49%
Secondary 3.40% 3.98% 3.46% 2.75% 3.51%
Grand Total 6.70% 5.34% 7.03% 8.10% 6.88%

So then I added the Ofsted Inspection judgements to the mix and I Xtabulated Ofsted grade against school type and averaged the Revenue Balance %age. This was much more interesting. While there is not much difference between and amongst Outsanding, Good and Satisfactory schools, those schools deemed Unsatisfactory by Ofsted tend to have much lower Revenue Balances.

Outstanding Good Satisfactory Unsatisfactory Grand Total
Community 6.80% 6.82% 6.53% 5.55% 6.64%
Foundation 5.07% 4.78% 5.18% 3.23% 4.84%
Voluntary aided 7.16% 7.07% 6.33% 4.50% 6.79%
Voluntary controlled 7.88% 7.86% 7.41% 5.79% 7.66%
Grand Total 6.92% 6.98% 6.59% 5.29% 6.76%

Are you saying that those schools which retain the least are the worst schools?

No I am not. What I am saying is that there is a statistical correlation between unsatisfactory Ofsted judgements and low retained balances. And it seems a bit silly to me for the DCSF to be encouraging schools to make their retained balances lower.

Please feel free to disagree or dispute any of this. I’m not a professional statistician. Prove me wrong and let me know when you have.

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