Schools storing up cash surpluses to face fines

Schools which save money by storing it away in their balances will face "fines" under a new blueprint devised by ministers.

The move comes after figures showed school reserves had more than doubled in the past seven years to £1.6bn. A consultation document on school funding says the average secondary school now has £225,000 stashed away - a 106 per cent increase - while primary schools have £58,000 (64 per cent extra).

As a result, ministers are recommending a levy on all positive balances - arguing that if it is pitched at five per cent it will release £75m a year for immediate use.

Last night the plan met with a hostile reception from school governors and headteachers' leaders who insisted that the "fine" was "harsh" and should be limited to money that had not been committed to future projects. "Otherwise, you could be planning a major new sports hall and suddenly find yourself having to find five per cent more for it," said Mick Brookes, general secretary of the National Association of Head Teachers. He said many schools were unable to spend money by the end of the school year because it had only been allocated for projects at the last minute.

However, the Schools Minister Jim Knight said of the £1.6bn surplus: "Basically, we want schools to spend it. We give them money to invest in education and not to put into the bank. The surplus has been going steadily up over the years."

Yesterday's document also suggested local authorities could levy a "claw back" on excessive balances of more than five per cent in primary schools and eight per cent in secondaries.