I’ve written before about the plight of local authorities’ services for schools. On the one hand, financial cuts are encouraging the retrenchment of discretionary services, and many local authorities are looking to reduce non-core support for schools. On the other hand, discretionary services offer the possibility of income generation to offset the cuts. The continuing drive to create more Academies and free schools, and the increasing competitiveness of the market has made these issues even more acute over the past year. So it is time, we thought, to take a closer look at what is going on with services for schools, and what can be done.
BDO conducted a survey of upper tier and unitary councils to gauge the state of the discretionary services for schools market and understand what local authorities are doing to cope with these changes. A full report will follow next month, but I thought it might be interesting to share with you a couple of the key findings so far:
From subsidy to surplus
Most councils we spoke to still subsidise parts of these services. Yet for every discretionary service we looked at we found examples of councils that were able to provide that service at zero net cost to the council. This suggests it is possible to provide a whole suite of services for schools without the need of subsidy from the local authority.
80% of the authorities we surveyed are looking to reduce the amount they currently spend on that subsidy. Many councils are looking to go even further, and there is widespread optimism that these services can be used to generate income for the Council. 80% of respondents told us that generating income is a key driver for continuing to provide these services. Thus the coming years are likely to see a shift towards a more commercial approach to these services.
As part of this drive to increase income, competition between providers will increase. Schools’ budgets are under pressure, and in order to generate more income, the answer is not to charge schools more and more, but find more and more schools to charge. 83% of Councils that still provide these services already trade with schools outside of their borders. This competition between local authorities, as well as competition between councils and other providers, will result in winners and losers. Put simply, not everyone can be a seller, and unless local authorities are able to create a compelling case for their services, they may be forced to withdraw from the market. This will create opportunities for providers looking to expand, and is likely to result in the consolidation of the market for sold services for schools into fewer larger national and regional providers.
These shifting market forces are driving radical changes in the ways local authorities provide these services. Our report will aim to explore the options available and highlight what steps Councils can take to choose which option is best for them.