Schools: Academies

Baroness Jones of Whitchurch Excerpts

Tuesday 3rd March 2015 Lords Chamber

Asked by

[Baroness Jones of Whitchurch]

To ask Her Majesty’s Government what advice they have issued to individual academy schools regarding the £2.5 billion held in their reserves.

[The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con)]

My Lords, academies are independent, self-managing organisations. Academies cannot borrow, except in exceptional circumstances, and so can build up reserves in order to accommodate longer-term plans that reflect their success and popularity, such as capital investment to fund maintenance or expanding provision for greater pupil numbers. They also need to hold cash to pay short-term obligations such as salaries.

Comparing net current assets of academies with the closest equivalent measure in local authority maintained schools shows that academies have 51 days’ cash, whereas local authority maintained schools, which can obtain money for capital from their local authorities, have 25 days’—51 days is a prudent buffer.

[Baroness Jones of Whitchurch (Lab)]

I thank the Minister for that reply, but does he accept that most parents would be appalled to know that academies are stockpiling public money, averaging nearly £6,000 per school, rather than spending it on their child’s education? Does he not accept that the fact that academies feel the need to have these reserves is simply a damaging consequence of having thousands of individual academies being managed separately—many would say badly—by the Secretary of State?

[Lord Nash]

As I already said, we regard the cash management of academies to be very prudent. We see no reason why efficiently run schools should not be involved in careful financial planning. It may well be that the Labour Party would like to run the school estate like they ran the economy—borrow, borrow, borrow and nearly go bust. We do not think that that is a sensible approach and we do not think that we should penalise successful schools.