Schools ‘sitting on £2bn of taxpayers’ cash’

Ministers have threatened to raid school bank accounts as it emerged they are hoarding almost £2 billion of taxpayers’ money.

The Government said the size of surplus budgets held by English state schools was “too high”.

Local councils may be ordered to seize cash and redistribute funds to other schools if head teachers fail to cut “excessive balances” by next year.

But the move has been criticised amid claims the Government is attempting to interfere in the way schools manage their money.

It follows a row in 2008 over proposals to claw back £85 million from as many as 20,000 primary, secondary and special schools in England.

Some heads said they were saving the money for buildings, playground improvements, sports facilities or drama studios and the move would put schemes under threat.

The Government eventually dropped the plans amid claims it represented a “tax” on prudent schools.

But Vernon Coaker, the Schools Minister, has already announced that similar proposals could be reinstated.

“It’s good to see that the majority of schools are managing their budgets well and also that the number of schools with excess surplus balances has fallen to its lowest level in 10 years,” he said.

“However, overall the level of surplus held by some individual schools is too high. While it is clearly sound financial management for schools to retain a small surplus from year to year, we expect revenue funding to be used to support the education and well-being of pupils in school now.”

He said action would be taken from September 2011 if the Government failed to “see a substantial reduction” in balances.

Money was desperately needed to ensure “funding is being spent on improving outcomes for children and young people”, he said.

The figures show a drop in the number of schools holding extra cash. Some 91 per cent of schools – around 20,000 in total – were holding a surplus of £1.9 billion in 2008/9, down from £2bn a year earlier.

A third held an “excessive balance”, which is defined as more than eight per cent of the budget for primary and special schools, and five per cent among secondaries.

In total, the surplus was almost £500 million higher than it should be, the Government said.

It means thousands of schools could face losing money, as ministers have repeatedly called for local authorities to use their powers to “claw back” excesses.

David Laws, the Liberal Democrat schools spokesman, said: “Ministers need to stop this endless attempt to bully schools into spending the money allocated to them.

“The Government is in no position to lecture anybody about good financial management. The truth is these balances are likely to melt away rapidly as the Government moves from feast to famine in the public sector.

“It is not surprising that many schools have run up these balances both to fund larger projects and also to ensure they can prudently manage their future budgets and staffing.”