The report said most of the posts were fixed-term contracts with less than two years’ service but nine resulted in redundancy payments due to length of service. It added no compulsory redundancies have been necessary to date. As part of the council’s budget setting process for 2024-25, the schools’ formula funding, which has grown to include pay awards, energy inflation, general inflation increases and pupil number changes, was cut by 3.9% per school on top of the 2.98% cut the previous year.
Merthyr Tydfil school balances held in reserves fell by 45% year on year to £2.1m at the end of 2023-24, with 45 roles being cut, including 17 teachers and 28 learning support assistants, mostly from September 2023. At the end of 2023-24, there were four schools in a deficit budget position, which is 17% of all Merthyr Tydfil Council schools.
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At the end of 2022-23, schools’ balances held in reserves were £3.84m, which was 6.5% of delegated schools expenditure, compared to average levels across Wales of 7.4%. This reduction in balances year-on-year was 39% compared to the average reduction across Wales of 29%.
Other ways in which schools have chosen to manage their budgets include reductions in capitation spend, IT and agency cover, and reducing building maintenance costs. Following this additional budget reduction in 2024-25, there are six schools applying for a planned licensed deficit (PLD) – three continuing from 2023-24 and three are new applications.
Four of these schools have submitted plans to recover the deficit over the period of the medium-term financial plan (MTFP) as part of their PLD, and two schools are currently unable to balance. Discussions are ongoing with these schools to find more savings to ensure the deficit budget is stabilised in 2024-25 and recovery plans are addressed to return to a balanced budget, the report said.
Given the position of falling balances across schools and an increasing number of deficit budgets, the aggregate schools balance as at March 31, 2025 is expected to be -£486,000. Over the period of the MTFP, an additional nine schools are projecting a deficit budget position in years two and three and further work will be done with these schools in the autumn term to consider plans to address these before April 2025, the report said.
In total, 15 of 24 (63%) are projecting a deficit budget at some point over the MTFP 2024-27. Although not all of the nine additional schools will require a deficit budget during the MTFP, this identifies those schools that need to reduce expenditure and usually to reduce staffing in order to set a balanced budget. To get all the latest Merthyr Tydfil news straight to your inbox, sign up to our newsletter here.
A similar trajectory in school balances is expected across Wales with an increasing number facing a deficit budget position in the current financial period and beyond, the report said. It said there is an increasing risk that school balances across Wales will be in an even more challenging position than prior to the pandemic by March 31, 2025, with more schools and local authorities in an overall deficit.
Based on information shared by all Welsh local authorities, schools’ balances on March 31, 2024 fell year-on-year by 54%, and 21% of all schools were in deficit compared to 8% the previous year, reflecting a similar position to Merthyr Tydfil. Across Wales, 12 local authorities have at least 20% of their schools in deficit and four have at least 35% in deficit, with two local authorities having an overall negative balance position across their schools’ budgets.
The committee report said school balances across Wales are in the most challenging position they have been since March 2020, and there are a similar number of schools in deficit as at that time. It also said this challenging picture of significantly falling balances and an increasing number of schools in a deficit budget has occurred within the context of significant in-year grants no longer being paid by Welsh Government.
The report said nothing was received in March 2023, with only small grant amounts being received in March 2024, as well as one year of significant budget reductions (2023-24) affecting schools across all Welsh local authorities. The local authority has a benchmark target for aggregate schools’ balances held at the financial year end, to be 3% of delegated funding.
Individual schools are recommended to hold balances of between 2% and 4% for primary schools and between 2.5% and 3.5% for secondary and special schools.
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