Financial freedom

SCHOOL FUNDING remains under pressure. One of the more independent and objective sources – the Institute for Fiscal Studies – has outlined inflationary pressures faced by schools, talking of a backlog of “day-to-day or current school spending per pupil, with larger cuts in school capital spending.”

A variety of authoritative sources testify to the ongoing and cumulative deficits that many maintained schools have been running year after year, requiring periodic stop-gap funding. And, as the BBC succinctly puts it, “When the public finances are in a tight spot, the axe often falls first on capital spending.”

The new UK Government has a number of important schools policies: make all schools – including academies and free schools – follow the national curriculum; a requirement for all new teachers entering the profession to have – or be in the process of gaining – qualified teacher status; bring multi-academy trusts into the inspection system; a legal requirement for every primary school to provide breakfast clubs; and other highly positive initiatives. It remains to be seen what the precise funding arrangements will be to support these.

In the meantime, while the absolute size of overall schools budgeting is an issue for Government, many school management teams are exploring financing options that allow them to maintain and improve school facilities without having large amounts of precious funding tied up in capital investments.

International Financial Reporting Standard

In the light of these trends, the adoption of the International Financial Reporting Standard (IFRS) 16 into LEA Maintained Schools (Schools) and the associated general consent documents granted by the Secretary of State for Education opens much-needed lease opportunities for both Maintained Schools (and Academies starting from September 2024). With capital spending under more pressure than ever, the increased flexibility to lease assets couldn’t have come soon enough for both Schools and funders.

For school management, the amended regulation has three clear advantages:

1. A much wider range of equipment can now be offered to schools on finance leases, helping to manage budgets and ease cash flow 
2. Technology upgrades – often in the best interests of pupils where a new shift in tech capabilities occurs – can also now be acquired using a finance lease
3. Finally, finance companies can now offer flexible financing periods, allowing schools to spread their payments over a longer term if they wish, to align budgets better with equipment requirements.

The general consent granted by the Secretary of State for Education allows the following asset types to be leased by Schools and Academies. Moreover, leases for items on this list will not need to be submitted to the Department for Education (DfE) and/or Education and Skills Funding Agency for approval. The DfE has stated that the list will be kept under review following implementation, and the relevant guidance and documents have been made available to Schools. Any leases for assets not included in the below list will still need to be submitted for consent.

• IT & telephony systems
• Vending, catering & cleaning equipment
• Furniture
• Bathroom/sanitary items
• Gym equipment
• Groundskeeping equipment
• LED lighting systems 
• Minibuses/vehicles used by the school
• Temporary classrooms/structures.

Support and benefits

At Siemens Financial Services, we have been supporting schools and academies with funding for over 25 years and we recognise the importance of the recent changes which now allow specialist financiers to broaden the offering of finance products and assets to the sector. We specifically are hearing from schools’ management teams that the availability of finance leases on a broader range of assets are seen as an essential tool to manage their equipment requirements with increased flexibility and the ability to upgrade equipment as technology evolves.

Of course, internal financial management disciplines need to be rigorously maintained. Leases should still be reviewed from a value for money perspective (as schools will be taking on debt). However, sector-expert finance providers will support you with this process, on the appropriate contractual terms to ensure your school is getting best value for money.

In conclusion, there is the immediate, obvious benefit to a school’s budget that will allow schools to pay for equipment over time, aligned with their budget requirements, rather than upfront. This has a subsequent positive impact, as having new and up-to-date equipment can enhance pupils’ ability to learn and develop. The new rules offer a new level of financial freedom for school management teams across the country.

George Littlewood is head of sales vendor finance UK at Siemens Financial Services

For more information, visit www.siemens.com/