Oral evidence: Academy Accounts and Performance, HC 1597
Oral evidence, 21 November 2018.
Witnesses
Jonathan Slater, Eileen Milner and Mike Pettifer.
Chair
Good afternoon, and welcome to the Public Accounts Committee on Wednesday 21 November 2018. This is the second of our inquiries—this year, anyway—on academies. It is based on the academies sector annual reporting accounts, but it is really looking at the general health of the academies sector. Hopefully, the witnesses today will have had a read of the evidence that we heard from some of the failed multi-academy trusts—one wasn’t failing, I have to say—on Monday. Some issues were raised there, and a parent and a former teacher from Whitehaven Academy gave a flavour of what it is like on the ground. That underlines for us why we are doing this. I am sure we all agree that we are all here to ensure that the pupils in our schools get a good education, and that taxpayers’ money is spent well and wisely. One of the reasons why we are looking at this is because we are concerned that there are a number of examples of where taxpayers’ money is not being spent wisely in the academies sector. Before we go into the detail, I will introduce our witnesses. I want to ask a brief question about pensions, Mr Slater—just to put you on alert. As our witnesses today, we have Eileen Milner, who heads up the Education and Skills Funding Agency, which was formerly—well, it was formerly two things, but we would have known it as the EFA. Jonathan Slater is the Permanent Secretary at the Department for Education. Mike Pettifer’s job description has eluded me—forgive me. He is the director of the academies and maintained schools group at the Education and Skills Funding Agency. Forgive, Mr Pettifer, for not having that long title at my fingertips. Mr Slater, can you talk through what problems you foresee with the teacher pensions increase, which will be dealt with by schools? What support is the Department providing to schools to make sure they can absorb and cope with that?
Jonathan Slater
Sure. A consequence of the change in the GDP deflator, and therefore the discount rate that is used to calculate employer pension contributions, is an increased cost incurred by schools and other institutions. In announcing that consequence, the Government said that schools would be financially compensated for the cost. We would give them the increased funding they need to pay those increased employer contributions—
Layla Moran
In full?
Jonathan Slater
In full, through to the end of the current spending review. Obviously, the next spending review is a matter for the next spending review, but this is through into 2019-20. We are still working through with the sector the mechanism by which we allocate the funding, and we will consult on it in due course, in the context of a commitment the Government have given to fully fund schools for that increased contribution through this spending review.
Chair
This spending review? We have the next spending review in spring next year. Do you still think it is that date?
Jonathan Slater
You are asking the wrong man. By definition, anything that is a commitment to the next spending review is a matter for the next spending review. Obviously, we will be pointing out those costs as part of that discussion.
Chair
Have you done an analysis of what the impact would be on a typical, average-sized, thousands-of-pupils secondary school?
Jonathan Slater
We have. I don’t have it at my fingertips.
Chair
Could you send us some details of the analysis you have done?
Jonathan Slater
Of course.
Chair
I am sure the schools have done it themselves, but it is helpful for us to understand that. We are pleased you have done it and have a picture, because it could have a very big impact on our schools.
Jonathan Slater
Yes of course we did it, and we are of course happy to update you.
Chair
We will leave that there, but I am sure we will be coming back to it. It is good that you are pulling together the sector annual reports and accounts, and there are some good bits there. We applaud you on the work you are doing on trying to pull together premises, and so on. You have committed to publish them quicker in the future, so do you think you will have the sector annual reports and accounts ready before the summer recess next year?
Jonathan Slater
That is definitely the plan. We said that it would take us longer this time round because, as you say, we are doing the first proper valuation of 12,917.
Chair
We have already congratulated you on that bit of work.
Jonathan Slater
That excuse is now out of the way, so for next year it should be a more straightforward exercise. We will be adjusting, rather than doing it from scratch. That is what makes me sit in front of you and say that our intention is to get that done by recess next time round.
Chair
You are a Department that is less impacted by Brexit in your day-to-day work, but if we were to crash out in March, would that affect your ability to turn these accounts round?
Jonathan Slater
If the UK were to leave the European Union without a deal, no doubt there would be all sorts of consequences, which have been debated elsewhere. My task is to get these accounts completed on time next time round.
Chair
Do you think you will be losing any staff to other Departments if there is a crisis? Have you had those discussions in Whitehall?
Jonathan Slater
We are having all sorts of contingency planning discussions at the moment, both about the impacts on the Department and about the contribution that the Department can make elsewhere, as you would expect.
Chair
Does that include deploying staff elsewhere? A shock troop of education officials at the border, for example?
Jonathan Slater
That specific proposition hasn’t been put to me.
Chair
I am sure you must have many good classroom teachers among your ranks who would be quite good at the border.
Jonathan Slater
Maybe, having heard that, I will get the request tomorrow.
Chair
You have a number of qualifications in this year’s accounts. How long do you think you will take to remove them? Will next year’s accounts be unqualified?
Jonathan Slater
The plan is to sit in front of you next year and say, “We’ve done it by recess and we haven’t got any qualifications.” That’s the plan. It was always the plan to have this one qualification with us this time round, because we recognised that the best we could do this time round would be to get an accurate valuation of the land and buildings for 2016-17. The accounts were qualified on the basis that we didn’t have a proper valuation in previous years, so by definition you end up with a qualification for having failed to reconcile an inaccurate figure the previous year with 2016-17. We have got to get that right for 2017-18. That happens in one of two ways: either we can reconcile properly, in which case the qualification goes, or we agree with the NAO that it can’t be done, in which case the qualification goes because we agree it can’t be done.
Chair
Do you think that is the biggest risk?
Jonathan Slater
Yes, that is the only remaining risk if things carry on as they are. Clearly, there are unknown unknowns, but that is the key thing that stands in the way of an unqualified set of accounts, as I see it.
Chair
Throughout this session, we will be discussing how you understand what is going on in academies. Do you think you are now getting what you need from the accounts as they stand to understand fully what is going on throughout the academies sector?
Jonathan Slater
We get more and more data each year. Access to digital systems provides opportunities to get more, and we learn from experience on the ground what information we will need for the future. It would be odd if I sat in front of you and said that we don’t expect to ever get more information than we have currently got, but we have a good degree of information, and it enables us to manage risks more effectively than we did in the past. We are managing all sorts of risks pretty well in those circumstances. Might there be further opportunities for more stuff in the future? I wouldn’t be surprised.
Chair
We will come on to things like related party transactions later, so we will probably get into that more then. One of the other areas of concern—we picked this up loud and clear not just from the parents who were with us on Monday, but from others too—is that it is very frustrating for parents, particularly in multi-academy trusts, not to be able to understand what is going on in their schools. Do you envisage that this document will be clear, simple and transparent enough for parents to understand when they need to go in and access information about what is going on in their academies and across the sector?
Jonathan Slater
This document? The sector accounts?
Chair
Yes.
Jonathan Slater
By definition, it is giving an aggregated view. If you want to know the detail about your school’s accounts, clearly the best place to start would be the accounts of that individual school.
Chair
That is interesting, because most of them say they can’t get it about their individual school if they are in a multi-academy trust.
Jonathan Slater
Sorry, about their trust. By definition, it is the trust’s money and they allocated it between the schools. The top-slicing is a matter for the trust. Of course, it is equally important that parents have a right of access to trust-level information.
Chair
I am glad you said that, because we will be coming on to that. Last week, we had your colleague, Sir Tom Scholar, in here with his Treasury team discussing the Whole of Government Accounts. The Treasury are working hard to put in commentaries where it is not strictly an accounts issue but they feel that there is a need to explain it so it becomes a useful document that helps the taxpayer and citizen understand how the Government spends their money. Do you envisage adding that sort of commentary to the whole of the academies sector accounts so parents can use it more easily?
Jonathan Slater
I hope you see the improvements we have made to the quantity and quality of relevant information in this set of accounts. For example, this time—obviously, we couldn’t do so before—we have reported on trends over time with respect to pay, related party transactions and notices from the RSCs. We have looked at and reported on the performance of multi-academy trusts by size and geography. We have compared the performance of disadvantaged pupils with pupils as a whole. We are seeking to make the thing more and more interesting, and I would expect that trend to continue. Obviously, we will be listening to the Committee’s advice about how we can make the thing more useful over time.
Chair
I think it is a bit like the Whole of Government Accounts. I have to say, to give you credit over the Treasury, which I am sure they won’t like me doing, you are doing it faster than in the Whole of Government Accounts. Admittedly, as they would say, it is a bit easier for you, but we recognise the progress. You are therefore setting an example with the clear explanation and the clear financials. From what we have been picking up from lots of sources, it seems to us that that is not true of multi-academy trusts. Many are not clear about what they are providing. Do you have any plans to force trusts to provide clearer and more transparent information, including at individual school level, for parents and governors?
Jonathan Slater
We require trusts to provide all sorts of information publicly. We require them to produce their own sets of accounts. We name and shame any trusts that don’t provide that information within the appropriate period of time. Clearly, it is important to us that trusts are accounting for their money.
Chair
Putting the numbers out is fine—that is absolutely the basics—but it is about having a wraparound explanation, as we were just discussing. You are planning that at the Department, so you are setting the tone and an example in the education sector, which is what your Department should be doing. We know and—let’s be honest—you know that multi-academy trusts don’t all do what you just described. Do you have any plans to push them to provide information so parents can see what is going on, understand it, and have explanations as well as the numbers—the financials?
Jonathan Slater
We expect multi-academy trusts to do that. We do some of it for them. If any parent wants to see any information about their trust or a school within the trust—how the children have done—they can see it online. No doubt, behind that question, there are particular sorts of information that you think trust should be providing and are not. I am happy to take those things away.
Chair
Okay. We will probably provide you with some of this as a list. Some parents have had to put in freedom of information requests to the trust running the school their child attends just to get what you would consider to be basic information. I know that, even in my excellent constituency where schools are very good, headteachers have sometimes been frightened to provide information about the money to the parents, thinking that it should not be available publicly. I have had to remind parents that it is taxpayers’ money. There is an issue, and not just in the academies sector.
Caroline Flint
On that point, I think what the Chair is trying to say is that it is about the individual schools and the information about the finances there. When parents just get it aggregated together, that doesn’t tell the whole story. Don’t you agree that where there is spending at trust level, it is obviously important that all schools benefit from it? You need to be able to show those things clearly.
Jonathan Slater
Of course. Absolutely. Again, it might be helpful if we were to explore afterwards examples of where schools have not been able to get the particular thing they want. We want to make transparent, for example, the extent to which the multi-academy trust aggregates resources to provide services across all of the schools. The average top slice is 4.6%. We want that to be in the public domain, and we want people to be able to see that trust by trust—absolutely, of course we do. I can’t deny that we sometimes find ourselves in that situation. We had to take court action against Durand to get access to their financial records. We won, obviously. I can’t deny that there are some circumstances in which not everything goes to plan. If you see something that you think is wrong systemically, I will follow up with you.
Chair
There is another example; I can’t remember the name of the group. I think it is the Aspirations Academies Trust. They have 13 schools, ranging from Islington, Feltham, Parkstone, Poole, others in Dorset, and Banbury. If you are a parent in Banbury, Oxfordshire, your financials would be aggregated with all those other schools.
Jonathan Slater
I expect a system of delegation, of course, between the governing body at the trust level and the requirement that is in place for school-level governance as well. I would expect that to be transparent and so on. I am not saying that everything works perfectly, and I am happy to follow up things you see that are not working, according to what you are hearing.
Chair
You have raised a couple of points that we need to pursue. One is about documentation. I wonder if the shredders are running fast at Bright Tribe right now. You certainly had problems getting documents at Durand. What happens when a trust goes down? What happens to those documents? Are there requirements? You have implied that there are no requirements that they have to provide those to the Department. I don’t know whether you or ESFA who should answer that. Do you want to start, Mr Slater?
Jonathan Slater
We require the return of all documentation from the trust, absolutely.
Chair
You would? Okay. If shredding activity were going on in a trust that was having difficulties, you would look dimly on that.
Mike Pettifer
We certainly would.
Jonathan Slater
We would be appalled by such a thing.
Chair
How would you stop that?
Jonathan Slater
We would be in the trust well before. If a school needs to be re-brokered from one trust to another, that is a consequence of action we have taken. We have sent people in who work for Eileen and Mike well before, and they are in there.
Chair
We will dig through all our records. We may need to provide you with examples of where information has been lost.
Jonathan Slater
No, absolutely. It is clearly in circumstances where trusts have not done a good job that you have got that risk. It is our task to manage that as well as we possibly can.
Chair
There’s another point you just touched on there with Durand, which is a case in point. If I mention Durand, I am not sure that now they could afford a solicitor’s letter. The pay-off of the former principal of £850,000 from his own trust suggests they might still have deep pockets, so I will wait for that letter. If I say it again, I will get another one. In that case, they have taken legal action against you and you had to take legal action to get the paperwork. Is there a problem with the structure of a school that has been set up with taxpayers’ money, where the Department itself has to take legal action in order to get documents?
Jonathan Slater
No. Clearly, the vast majority of trusts are doing a good job with taxpayers’ money: 98% of trusts’ accounts are unqualified, as this sets out, as you would expect. And, just as you expect, the vast majority of local authority maintained schools are doing a proper job with the resources at their disposal.
Chair
We do not discount that. We are focusing on the ones with particular problems.
Jonathan Slater
Equally, there are a small number both of academy trusts and of local authority maintained schools that do not do a good job with the resources at their disposal. For academy trusts in particular, since they report to us, it is our job to put whatever controls we can in place and follow up with whatever action we should to minimise that happening, and to take action where it does. Clearly, the Durand case is an incredibly rare example, which is why you had Greg Martin in front of you. That does not normally happen. It is not a unique case but clearly a very unusual one.
Chair
How many schools have you or the ESFA had to take legal action against?
Jonathan Slater
That is the only one.
Chair
Okay. How many reports on schools are being held up by legal action from the other side—investigations and reports on schools?
Mike Pettifer
I don’t think there are any.
Jonathan Slater
I don’t think there are any.
Chair
None? I think I might have an example of one, but I will get back on that.
Jonathan Slater
That is always the danger of us saying none, isn’t it? Subject, of course, to any information that the Committee might have.
Chair
You’ll get your knighthood soon.
Sir Geoffrey Clifton-Brown
Good afternoon, Mr Slater. Of course, this Committee is naturally interested in the 2% that are not performing properly. The annual sector report and accounts had a somewhat, though small, number of auditors showing concern. Comparing 2015-16 and 2016-17 accounts, that number went up from 21 to 82. In those same accounts, there were 93 auditors’ doubts. What action would your Department be taking, hopefully before those accounts are published, in those cases where auditors are clearly picking up concerns?
Jonathan Slater
I will ask Mike to summarise.
Mike Pettifer
We look at all the accounts. Every single accounts return is looked through. We do machine reading as well. Jonathan mentioned the digital ability we have now—because they are electronic returns, we can do all kinds of analysis on them. We will look into and investigate, if that is necessary, any returns that have significant concerns around them. They can be relatively minor issues or they can be indicators of something more serious. If they are indicators of something more serious, that is when we will go in in some depth. You have given us numerical figures. We had 1,200 additional academies this year, so the number of academies is growing. As a percentage, we may actually be in a better position—that number is probably reducing.
Sir Geoffrey Clifton-Brown
In percentage terms, 82 is a very small number, but it is still significant if you are a child in one of those schools. As the Chair said, we are looking for every school in the country to provide a decent standard of education. How many of those 82 from the ’16-’17 accounts would you be taking serious action on?
Mike Pettifer
It would depend on what the issue was in the accounts. We would investigate the issue first. If the issue was an indicator of more serious fundamental weaknesses, that is when we would start taking action and looking in detail. We can investigate or we can do a fact-finding review. I can send my local teams in to start talking through with the trust how it operates. We can talk to the trustees and the chair of the trust. There are numerous routes in. We work with well over 100 trusts during your average year, and those are positive as well as negative interactions.
Sir Amyas Morse
Simon wants to correct something that was said.
Simon Helps
The number of academies has increased but auditor opinions are given at academy trust level. The increase in the number of academy trusts was actually very small—the number went from 3,013 to 3,054. In terms of comparing numbers, it is actually fairly stable.
Mike Pettifer
I beg your pardon. That is a very fair point.
Eileen Milner
That is very helpful. When things get to a going-concern issue, it is very likely that we will have had engagement with the trust already. We are not waiting for the accounts return to tell us that there is a problem. Typically, these things accumulate over time, and some of those 82 will be trusts that are moving to be either re-brokered or closed, sadly. We do take our responsibility very seriously. That is one of the reasons why Mike and colleagues in our market oversight area have moved to ask trusts to provide us with three-year financial forecasts so we are better able to predict and get ahead of issues like this, and so we are working to prevent rather than react to failure. That really has to be our ambition.
Sir Geoffrey Clifton-Brown
How many notices to improve are outstanding at the moment?
Eileen Milner
We have 42. To bore you with numbers—this is my one number for the day—that is 1.49% of the totality of the academy population.
Chair
I want to go back to a question that I perhaps misphrased slightly—you were right to be wary. According to Schools Week, your Department told it in response to a freedom of information request—so it must be true—that the report on Lilac Sky is ready to be published but one of the people named in the report has threatened legal action. They may not actually have taken legal action, but they have threatened it. Perhaps I can rephrase my question: how often are you threatened with legal action about the publication of reports on failed academies?
Jonathan Slater
It does sound like at least once, doesn’t it? Sorry, I am not over the detail of that specific case. Obviously Lilac Sky is a very difficult case for us. I do not know the specific issue there.
Chair
I will try to pull together from the various pieces of evidence we have had, both privately and publicly, a list of publications that we think are coming through your Department—some of this information has come in quite late—and ask you to comment on that, if that is okay.
Jonathan Slater
That would be very helpful.
Chair
What we cannot do in this hearing, we will write to you about.
Anne Marie Morris
Mr Slater, one of the challenges we set last time we looked at this was quite how you cut the data so we have useful comparisons, such as geographic comparisons and size of school comparisons. That is not the way you have approached this. Can you explain why?
Jonathan Slater
I think we have tried to cut the data both by geography and by size, but there may well be things that you think we should be doing that we are not currently doing, and I am always up for trying to do things—
Chair
Mr Slater has read your mind, Ms Morris.
Anne Marie Morris
Okay. How, with that information, could I look at university technical colleges—they are different as a group—and compare that data?
Jonathan Slater
We could provide a cut of the data in the next version of this report on UTCs in particular. This, of course, is not the only way that we publish performance information, and you can see on our website today the performance of every single UTC individually and collectively. That is important data, and when we produce our performance tables we seek to draw attention to the difference between a typical UTC and a typical secondary school, because of the difference in the age group. We try to draw out that distinction, but if you think it would be good to include UTC-specific data in this document separately from anything else, we will consider that option. There is always a question about how much to include.
Chair
We appreciate your openness to our suggestions. I think we have mentioned before that the Whole of Government Accounts is moving toward being a more useful document and we hope that this sectoral account could be similarly useful to people. We have some other suggestions as well.
Anne Marie Morris
Specifically, the financial information by geography and trust size is not in the annual report.
Jonathan Slater
Okay. I think we put performance information in, but we are seriously very happy to put more stuff in each time.
Anne Marie Morris
That is useful, but what I am hearing is that you have not really thought about it from the user’s perspective. It is fine for us to give you suggestions, but what I would love you to do is to stand back and say, “Who is looking at that data? How might they like to use it—whether that is a parent, a school governor, a county councillor wanting to look at all the schools in that area or someone wanting to make comparisons between UTCs and grant maintained schools?” Could you do that sort of work for us?
Jonathan Slater
Yes. Again, there will obviously be a question about how much of that one puts in a written document of this sort, which is 100 pages long—and the more you put into it, the less accessible it becomes—and how much you put online. We have put 200 pages of annexes that were in the previous document, which was 300 pages long, online. Then, of course, we have a lot more information than that on the website as well. I think we are thinking in a user-centred way about how to give parents, councillors and schools performance and financial information for their school and to compare it with others. To give you one example, for the last 18 months we have been providing publicly available information that enables governors of a school, or you, or anybody else, to see how much that school is spending on different sorts of things—management costs, non-pay costs or supply—with a like group of schools with a similar demography. The reason we provide that information is that we want the governing bodies of schools to think carefully about what their school is spending in comparison with like schools. We do not have that in here, but that is crucial information and we think it is really user-friendly. We obviously have a job of work to do to encourage more use of that sort of information. I would be happy to come back to you and set out more comprehensively, if you find it useful, how we give information beyond this document, because it is obviously important that we do that.
Anne Marie Morris
I think, Mr Slater, I would like you to come back to me with your thoughts on who the key users of this data might be and how you might shape that report going forward.
Chair
Ms Morris, I sense you are stepping into possible recommendation territory.
Anne Marie Morris
Oh dear.
Chair
We don’t want to alert Mr Slater to what we might be putting in the report. We can discuss this afterwards.
Anne Marie Morris
We can indeed. In that case, I have one addition, Mr Slater: the new virtual schools, which are looking after looked-after children. The information about those schools is across a number of geographical areas and types of schools. How are you going to produce information about their financial success and viability?
Jonathan Slater
I’m afraid I don’t have the answer to that question off the top of my head. Do you?
Eileen Milner
No.
Mike Pettifer
No.
Jonathan Slater
I am sorry. I would very much expect that the relevant team in my Department has the answer to that question, and I will make sure you have it.
Chair
We recognise there is an esoteric mix.
Layla Moran
Can I turn to high pay? Ms Milner, I know you have written to various trusts.
Eileen Milner
I have indeed.
Layla Moran
Did they all reply?
Eileen Milner
Yes, they did. We gave them very little option other than to reply. I have written four letters and will write a fifth, in all likelihood, in spring next year. They were targeted letters, not to everybody. In the first tranche we were able to identify trusts that were paying more than £150,000. We then widened out to trusts that were paying more than two people £100,000. In the process of writing to them, it was not just, “We have noticed,” but, “We have noticed and we would like you to explain to us.”
Layla Moran
What did they say? What kinds of things did they cite for that, especially for the £150,000?
Eileen Milner
The first principle of academies is that they are founded on autonomy. They are groupings of schools, and we recognise that when you get to scale and complexity, you want to attract and retain the best people. Reward is one function of that. My letters were founded on the principles that we expect salary setting to be a transparent process, that it should be proportionate and that it should be justifiable in the context of the fact that academy trusts both have charitable status and are public sector bodies. Those were the challenges that were deployed. In those letters to the 213, between 2015-16 and 2016-17 about half those trusts ceased paying salaries at the level that came into scope.
Layla Moran
There has been a drive downwards.
Eileen Milner
Yes. With the remainder, we went beyond letters to ask for evidence about the principles on which salaries were set, how those processes worked and who was involved. We asked for guarantees that people in receipt of these salaries were not influencing process. That led to many conversations with people.
Layla Moran
How many academies were you pushing back on?
Eileen Milner
I would have to write to you with the exact number.
Chair
What is the ballpark figure?
Eileen Milner
A ballpark would be that about 40 trusts had conversations with us—the Minister and me.
Chair
It went up to ministerial level?
Eileen Milner
Indeed.
Chair
Were those the trusts that were defending their practices?
Eileen Milner
They were the ones where, having asked for evidence on the transparency, proportionality and justifiability tests that I deploy, we felt that it was very important that the chair of trustees in particular knew how seriously we regarded this matter. I hope you will take confidence from the fact that we have done this very seriously and will continue. I am particularly pleased with the way that it has been received by the sector. We have had representative bodies such as the Confederation of School Trusts, ASCL and NAHT say, “Actually, you are calling out the right thing here. We don’t like having our brand associated with disproportionate reward.” That has been encouraging.
Layla Moran
I think many will take heart from that. How concerned are you that the governors and the trustees themselves were not picking up that some practices should have been questioned?
Eileen Milner
In the majority of cases, I think we should see the glass half—
Layla Moran
For the 40-ish that you were pushing back on, in particular.
Eileen Milner
For the 40 or so that we pushed back on—I would put an “ish” around that—many said, “We know we are doing the right thing, but you are asking us to document it. That is the thing we think we have been a little lax on.” On the transparency part, if a parent or a fellow member of staff came along and said, “Can you demonstrate to us clearly in a documented way what the process is that you gone through?” it is not being captured in that systematic way. Having had it drawn to their attention, they have said, “Absolutely, we realise that, as you would expect any proper organisation to do.” They have committed to go away and do that. We will test them on it.
Layla Moran
Is that something you are considering putting into guidance?
Eileen Milner
We will work with trusts and representative bodies to see if we can put guidance out there. CST, independent of us, is seeking to issue some guidelines about pay and benchmarks in the sector. That is to be welcomed. It is a sign of a responsible and maturing sector.
Layla Moran
Were there any paying more than, say, £200,000? Do you have enough information?
Eileen Milner
We certainly have enough information.
Layla Moran
And are you planning to release that?
Eileen Milner
There are a relatively small number of outliers and they are robust in their defence, as autonomous bodies, of the salaries that they pay. We are robust in our challenge around the proportionality and the justifiability.
Jonathan Slater
Of course, in the individual accounts of the individual trusts you can find the details of who is paid more than £150,000 or £200,000—4% of trusts pay anybody more than £150,000. There are some well-known cases paid significantly more than that. They are exceptional, and we have been chasing them up in precisely the way that Eileen described.
Eileen Milner
Part of what we are doing, in the maturing of the oversight function, is that in the accounts return that will be coming in to us annually, any trust paying more than £100,000 to someone—even if that person is not a trustee—has to declare that role and tell us where that role sits in the school, whether it is around business administration and leadership there, or whether it is a teaching and curriculum leadership position.
Layla Moran
That is helpful to know. How happy are you that executive head teachers and CEOs of 10 trusts are paid off-role as consultants?
Eileen Milner
I would say that it happens very rarely, and we take a keen interest where it does happen. We would expect that where practices such as that are being picked up, they would be consulting with us to outline the exceptional circumstances. I imagine it would only ever be acceptable for a very short period of time. We have had an instance with one trust recently where the chairman was called in and held to account, and resigned on the basis that he felt that he should not have let this happen. I would not want you to think that we are not taking it seriously.
Gareth Snell
Briefly, Ms Milner, you said that the sign of a maturing sector is that they will be bringing in this guidance. What is the timescale for that? Academies and multi-academy trusts are now not really a new thing. When do you anticipate that guidance being available to all trusts and all academies, so that they know what they should be looking for?
Eileen Milner
We are working to develop what best practice would look like, in terms of the process that you should go through as an academy trust in setting salaries. We would certainly aim to get that out within the next six to 12 months.
Gareth Snell
So in six to 12 months that should be available for all?
Eileen Milner
That should be available.
Gareth Snell
I appreciate that a retrospective view is sometimes not helpful, but given where we are with the academy programme, is this not something that the Department should have been doing much sooner? The issue of high pay in a very small sector of academies and multi-academy trusts is not new, so why is the Department expecting to wait another six to 12 months to have that guidance in place?
Eileen Milner
We want to get it right. I am not saying that it will be as long as 12 months, but I don’t want to over-promise and under-deliver to you, so I think it is better to give you a time frame. You will appreciate that I started this process of challenging high pay less than a year ago and it is having an impact already.
Gareth Snell
The issue of high pay has not only arisen in the last year.
Eileen Milner
No, I am sure it hasn’t, but I am saying that this is what I am doing and I am quite zealous about it. I think we are having an impact. We want to get good guidance out. We are working with representative bodies, and with the Confederation of School Trusts in particular. We will issue guidance, but what is outside of the funding agreement that we have with academy trusts is a power for us to hold people to pay bands, if you like. The trusts themselves are saying that it would not be unhelpful to them to have some structure and some guidance around that, and I think that is entirely healthy.
Gareth Snell
Part of that will depend on having a trustee board that is familiar with that and has expertise in dealing with it, and also pushing back on some very senior professionals, who are principals or executive heads. Given that when multi-academy trusts come in, or when a school becomes an academy, all the local authority members get taken off the trust board, what is the Department for Education doing to ensure that the people who come in as trustees have the knowledge, the skills and the confidence to challenge some of these high-paid executives? Do you think you have a role at all?
Mike Pettifer
We have an academy ambassadors programme, on which there are now more than 1,000 ambassadors. They are volunteers from industry who go into boards of trusts. They are from the business sector, they are financially numerate and they are experts in that kind of area. One of their roles is to help to build the capacity of the trust and make sure that trustees know what kind of management information they ought to be looking for. We also have a school resource management website, on which there is some guidance about understanding your data and your management information. If you were a chair who did not know anything in terms of what MI and data you ought to ask for, that would give you everything you ought to be asking for from your school or trust—from multiple schools if you were in a multi-academy trust—to manage progress and understand what is happening both educationally and financially. There is quite a lot of support out there. We use those academy ambassadors not just for the issues that we have to resolve, but for positive capacity building.
Gareth Snell
This is my last question. What proportion of all academies and multi-academy trusts have actively engaged with that ambassador programme?
Mike Pettifer
I could not give you the number off the top of my head—apologies.
Gareth Snell
High? Low?
Mike Pettifer
I would imagine it is high, because there are 1,000 academy ambassadors and 3,000 trusts.
Jonathan Slater
Equally, we recognise there is more to be done in this space. The Secretary of State announced at the recent National Governance Association conference that we are going to be putting more money into training governors to do that job well. There is no doubt that that would be helpful, and that is what we are going to be doing.
Chair
On Monday, a couple of heads suggested paying chairs of governing bodies. Is that in the Department’s plans?
Jonathan Slater
That is not Government policy.
Chair
Mr Pettifer, I think you were going to pick up on a point we raised earlier.
Mike Pettifer
There were two points I wanted to make. First, there is quite a bit more guidance in the Academies Financial Handbook on high pay, in particular, and the processes and principles we expect to be followed in a remuneration committee. There is already a bit more guidance out there than there was previously. Secondly, the profile of high pay has been quite high for some time. The increases levelled off in percentage terms from 2015-16 to 2016-17, but we have to do a lot more than that, and we recognise that. The 213 trusts that were paying over £150,000 in their 2015-16 accounts reduced by 52 once we had a look.
Gareth Snell
Just to be clear, when you say “in percentage terms”, what you actually mean is, “It is going up at an appreciable rate, the same as the academy sector itself is growing.” You are not saying it is reducing.
Jonathan Slater
Let’s see what happens. We are reporting on the 2016-17 accounts. What Eileen has been up to, she has been doing for the last year or so. We are not going to claim it before it happens, but clearly we are determined to take action here.
Chair
I would just echo what Ms Milner said: we had a lot of feedback the last time we discussed this from people saying, “We’re embarrassed to be in a sector where people are paid that much.”
Jonathan Slater
Exactly.
Chair
The irony is not lost on us that a sector that was set up to have pay freedoms is now very interested in having pay bands. I will leave that one for others to think and talk about.
Sir Geoffrey Clifton-Brown
It is all very well trying to deal with the high pay of existing employees. What are you doing to make sure that, if any governing body or board of trustees wanted to pay somebody over £150,000 before they actually employed that person, they would have to have a justification for doing so?
Jonathan Slater
That goes to the strengthening that Mike referred to in the Academies Financial Handbook, which sets out the requirements on governing bodies, but we need to go further in terms of the guidance that Eileen was describing. But they do not have to seek our approval in advance, if that is what you are asking.
Layla Moran
One final question on pay. From the work you have seen so far, Ms Milner, have you noticed any trends—in particular geographical trends—in where high pay happens? What about the size of trusts? I imagine that would be a factor.
Eileen Milner
You would naturally imagine that high pay is in larger and more complex trusts. That is where the justifiable and proportionate questions are brought to bear. We have been particularly keen to look at single academy trusts and smaller trusts that have appeared to be rewarding at levels that do not seem commensurate with the complexity. As for geographic patterns, London tends to be higher, as do places where it is harder to attract, but it is not specific. I hope you are getting assurance about the things that we are looking at.
Layla Moran
Absolutely. Are you planning to publish any of the outcomes of this piece of work that is clearly very useful?
Eileen Milner
What we would like to do in the SARA is continue the process of talking about high pay and, as we said to your colleague, to continue thinking about how what we put in there is useful, and some of the commentary that we put alongside it. This is a useful place to talk about it.
Layla Moran
Thank you. I would like to turn now to related party transactions, which came up recently. It was interesting that on Monday, the panel unanimously felt that all third-party transactions should be approved by the ESFA. That was also a recommendation in the report. Could you expand on why that has not been done?
Eileen Milner
I think what all three of us took away from our last discussion with you on RPTs was that we needed to think very hard about something that was going to provide the rigour that we all want, but was going to work. We also have to remember that 98% of RPTs, when considered by external auditors, and when some are looked at by us, are compliant with the rules as set out. So, it is a small proportion there and we have to think about some of the benefits that come from related party transactions. When I take counsel from people who are in the sector—I think about local authorities that are delivering school improvement, and diocesan services where they provide services—I have to be mindful of the proportionality question. We do want to uncover practice that is absolutely not right, but we do not want to make life so difficult that we take away the opportunity for value from some of these sectors and settings. What we have suggested is that we are going to put in place a system that is more rigorous than anywhere else in any sector, and we are building that at the moment. Every single RPT—
Chair
Related party transaction.
Eileen Milner
I apologise. Every single related party transaction has to be declared. Knowingly, a trust has to say, “We know we are making a related party transaction. In telling you that we are doing this, we are saying that we have done all the things you have set out in the Academies Financial Handbook by way of ensuring that that conflict is recognised and being managed, and that we have been through proper procurement.” That is the first thing they have to do.
Layla Moran
Is that why it is taking until 2019 to do it, rather than getting it done this year?
Eileen Milner
Yes, so that we can run a system that is smooth and from which we can extract data. The first thing is to get people to sign things off knowingly.
Layla Moran
So schools will have to comply from April 2019. When will it be rolled out?
Eileen Milner
We are starting to test after Christmas. We hope to have a number of trusts up and running on it during that period from January through to April, so that we can iron out any little glitches. The expectation we have set is that, as of April, in every single trust, every single related party transaction has to be declared. We have put a ceiling of £20,000 where you have to come to us for permission. We are building a small team to deal with those permissions, to ensure that we are skilled and qualified to be asking for all the right information that we need.
Layla Moran
How did you pick that number? Why £20,000?
Eileen Milner
We were looking at the pattern of related party transactions that happen. We consulted those where there are established relationships and some explanation as to why a related party transaction might not be a bad thing. We concluded that the figure of £20,000 was a place to start. What we are very open to doing, having run this through for a year, is coming back and saying to you, “On the basis of the evidence we have seen, we might reduce it to zero, we might take it to £10,000 or we might put it to £40,000.” But we need a bit more evidence, and we need to instil this discipline of declaration into the sector. That is what we want to do. We are very happy to be honest with you if we say that £20,000 is not the right number, and to have you challenge us on it, but we would like to have an evidence base to work from. We are also confident that the request for declaration makes it easier for me to say to the auditor community, “I expect you to be really curious now and to be looking at whether the trust you are auditing has made declarations and, if they have, whether they appear right to you.” We are trying to put auditable trails in and to encourage curiosity, but also to have that mindful discipline at a trust level of, “Are we certain that this is the right thing to do? Have we followed all proper process?”
Layla Moran
We heard a lot on Monday about specific cases around related party transactions that are not so obvious to find—companies that are owned by one person but the relationship is not entirely clear, and so forth. What resource are you putting behind the team to ensure that enough robust checks are made of all the different related parties in these transactions, to root out the bad apples? It is only a few, but it is significant.
Eileen Milner
That’s why we are putting together a specialist team to work on related party transactions and ensuring that they have some of the skills in—
Chair
Can you tell us precisely what some of those skills are that you think they will need?
Eileen Milner
Things such as forensic accounting, being able to understand what a trail might look like from one individual to—
Chair
Do you have the powers to go in and do forensic accounting, digging through even the bank accounts of trustees?
Eileen Milner
I am not sure we could get to bank accounts, but we can certainly get to complex organisational structures and settings. We have to do that with what is available to us, but I hope you would take confidence that we understand this and we are skilling people to do it, and we want to be able to do the very best possible job. Ultimately, what we want to achieve is the cultural and behavioural change around related party transactions, so that that very small number of people will decide that this is not for them and that it is not an avenue that they will even think about doing. I was very struck by what David Boyle said, when you heard from him in your hearing on Monday: we must remember that the majority of schools are run by very principled people. A lot of my life is lived through the lens of a very tiny proportion and it is skewed toward people who want to do the wrong thing. I don’t want to forget the vast proportion who come to work to do the right thing.
Chair
We heard what he said, and we hear what you say on that as well.
Layla Moran
Moving on to the financial health of the whole sector, in our accounts we have the cumulative deficits. Mr Slater, why don’t we have the in-year deficits as well? Do we have the number of MATs that are in in-year deficits rather than—
Jonathan Slater
Simply because what we are doing here is reporting on the accounting position at the end of the financial year, in accordance with the—
Layla Moran
My understanding is that it is three years of deficits—is that right? I am looking at the NAO.
Simon Helps
The cumulative deficits in an academy trust would be since the inception of the trust, so some of those will go back to 2010.
Layla Moran
Since the inception of the trust—so we are looking at several years here. What I am trying to get at is that we know that the number of schools, certainly in the maintained sector, that have in-year deficits is growing. Do you have enough information in these accounts to know whether that pattern is being repeated in academies too, or do you need more information?
Jonathan Slater
Clearly, there is an important distinction that you are drawing between the financial position at the end of a financial year and a decision that a particular trust, or any other school or entity, makes to spend more resources in a particular year than the resources at its disposal. The whole purpose of holding back some surpluses is to enable you to spend them in a future year, over and above the income you have in that year. You will save up money to spend in a particular year on a capital item, and in the year in which you spend it you will have an in-year deficit, because you are spending more than you receive in that particular year. That is not an enormously helpful statistic from the point of view of the overall financial health of the sector, where the more important question is the position at the end of the year. We do have information on the in-year position as well, but I would not want you to use that to make a judgment about the health of the sector in the round, because that will hide a choice—
Layla Moran
Although 5.6% and 5.9% sound like small numbers or percentages, actually they are fairly large numbers of trusts, so it is moving in the wrong direction. Are you concerned about that?
Jonathan Slater
Say what you see—94% of academy trusts are in surplus, or zero, against, as you say, about 6% in deficit. You have also seen an increase in local authority end-of-year deficits; it was 94% but is down to 91%. Clearly, we keep a close watch on those numbers.
Layla Moran
Are you expecting them to keep going in that direction, or do you have confidence that this is the peak of it and they will get healthier?
Jonathan Slater
The crucial challenge for schools—both local authority maintained schools and academies—is to identify whether they are facing financial challenge and, if they are, to take the appropriate action. And we are working increasingly hard to support trusts and, indeed, local authority maintained schools, where they need support, to improve their efficiency where they are struggling. That is why Mike was reporting earlier on the work the ESFA does these days to ask for three-year financial forecasts, and we are more actively involved with those schools than we have been in the past, to make sure the situation doesn’t get worse and gets better.
Layla Moran
Mr Pettifer, do you have the information you need to be able to make those assessments and work with the schools early enough?
Mike Pettifer
Yes, we do. The in-year deficit just tells you that they have spent more than they have earned. If they have got reserves, they can use those reserves and that can be planned spend. So, if they are investing in school improvement, infrastructure change, restructures, capital—it can include all of those positive things. And we would expect trusts to keep reinvesting taxpayers’ money back into improvements. So it could be a healthy cycle. If there are two or three years of consecutive in-year deficits, we would start looking at those and we would want to understand that they were planned in-year deficits, as opposed to spending more than you earn with no real plan.
Layla Moran
How many of those are a result of not getting the pupil numbers quite right when academies have been set up? There are a number of examples of academies that have been allowed to expand and they do not have the number of places, and that starts eating into their accounts. I have an example in Oxfordshire of exactly that. In fact, the multi-academy company involved now looks like it is going to fold and it is the taxpayer who will pick up the bill. How many of the trusts in deficit are a result of poor planning for places?
Mike Pettifer
There will be a proportion of them. There is a small number of academy trusts on estimate funding, which is where they estimate their pupil numbers, so that’s when they would get their estimates wrong. The vast majority of academy schools and trusts are working on the previous year’s census figures, so they wouldn’t be estimating. They would be planning their own pupil numbers and we would expect them to have pupil plans, working with the local authority, looking at the demographics and population increase and decrease. And there are funding formula factors that we have available for temporary dips in population. In addition, and in response to your wider question, we are doing a lot both to build the capability and to offer helpful resources to schools, to make sure that they can run their schools more efficiently and push those savings through to the frontline on school improvement and so on. I mentioned earlier that we have a school resource management website. Jonathan was referring earlier to the benchmarking tool on there. That is very popular. It enables schools to go in and look at their own spend and see how that spend compares with a statistical neighbour that is doing similar things.
Layla Moran
Is that information at a school level something that you would consider having MATs publish? I ask because what has happened with this MAC in Oxfordshire is that one of the schools started to fail financially, and that has had a massive impact financially on all the other schools in the MAC. And the parents, when they hear that the national funding formula is per child, do not understand that. How are you ensuring that every child in all of the schools in those multi-academy trusts is getting the resourcing that they need? Are you looking at that?
Mike Pettifer
Yes. We work with multi-academy trusts. It is their responsibility to ensure that those schools are getting the appropriate resources to run properly.
Layla Moran
I visited one of those schools and she described how, as a result of the financial failure of one of the schools in the MAC, she felt that every other school was in a managed decline of financing. How do we stop that from happening?
Jonathan Slater
We’ve been ramping up for the last two years—we continue to do so—the support we provide to multi-academy trusts and the schools within them, to manage their resources as efficiently as they possibly can. On the basis of the three-year financial forecast, which Mike was referring to, we have started sending expert people into individual trusts where the information we have suggests that there is a problem, to identify what might be done about it for the benefit of all of the children in each of the schools in the multi-academy trust. Clearly, it would not be an adequate response to a particular problem in one school to rob Peter to pay Paul. That would not be an appropriate response. That would not be efficient.
Layla Moran
But that is happening increasingly.
Jonathan Slater
I am not suggesting that there are no problems at all. We were watching one, no doubt, on the TV last night. I am saying that we have the first 40 schools advisers out in trusts now. They have been looking at the first 72 trusts for efficiency improvements. They are getting a very positive response and finding about £500,000 efficiency opportunities per trust. We are increasing the numbers from 40 to about 160, who will working with 800 over a year, to ensure that schools are using their resources as efficiently as possible for the benefit of those children.
Chair
There is a difference between efficiently across the piece and what Ms Moran has described, which we have had other evidence of. Take Wakefield City Academies Trust as an example, where schools with differing budget situations were brought into one and it collapsed. It is still not yet clear what will happen to the schools that made up the trust, as they are separated: they are re-brokered.
Jonathan Slater
Clearly, the Wakefield City Academies Trust, which we discussed in previous meetings, didn’t do its job properly.
Chair
But in the end, as Ms Moran said, it is the children who lose out.
Jonathan Slater
Of course, absolutely. We worked as hard and as fast as we could to switch those schools to trusts that could manage them well. The point of having three-year forecast information and a team of 160 people, which previously did not exist, is to get ahead of those sorts of failures in the future. That is what we are doing. I am not sitting in front of you and saying that there are no examples of children not getting the education they should because of schools not properly using their resources.
Chair
Can we just be clear about this? If you are a multi-academy trust and you have a school—perhaps you were urged by the Department to take on one with a budget deficit—there may be some money coming from the Department. But it may be the case that they can choose—as they can under the current system—to put extra money into a school that particularly needs it, which could denude another school of the resources it deserves, which is what Ms Moran is driving at. That could happen and can still happen.
Layla Moran
It does happen.
Jonathan Slater
It is a simple matter of fact, as you know, that the resources are owned at the multi-academy trust level. That is the nature of the academy model—it absolutely is. Equally, the Academies Financial Handbook, strengthened each year, sets out how that is to operate and the requirements for systems of delegation and reporting upwards and downwards at the school level. Where we see an example of a trust in financial difficulties, we are sending people in. By efficiency improvement, we mean what you would expect us to mean—not robbing Peter to pay Paul.
Chair
How do you enforce that?
Layla Moran
Is there a floor figure that all schools should be receiving? I can understand how there will be small fluctuations between schools, but I would like to understand how parents know that there is at least a very minimum amount of funding just to run the thing that schools at an individual level are getting.
Chair
Whitehaven was running out of footballs!
Jonathan Slater
Our powers of intervention are up to and including taking the school away from the trust, and that is what we did.
Layla Moran
But that is an extreme case.
Jonathan Slater
Sure, so in the vast majority of occasions we would anticipate not needing to get to that position. We publish, but we do not specify the amount of money that can be spent at trust level across all the schools. We do not have a hard-and-fast rule on that.
Layla Moran
Fair enough, if there is not a rule. However, when you look at the individual accounts of MATs and notice that individual schools are mopping up the problems of, say, a school that is in financial difficulty, at what level do you say that something is not right and go in and investigate whether teaching and learning is being affected by that low funding?
Chair
What rings alarm bells?
Jonathan Slater
We would intervene for one of two reasons: first, if the finances of the trust were of concern, which I guess is the focus of this conversation, and secondly, if the performance of the school was inadequate.
Layla Moran
Which you would only know if they had had an Ofsted inspection.
Jonathan Slater
No. We have access to data. We can invite Ofsted to go in and have a look more quickly if we see a particular concern.
Layla Moran
I sit on the performance and standards committee at my primary school. We get the data but several months after it is submitted by the teachers. By the time you pick it up, a young child will potentially have been receiving a poor education for several months of their life. Some of it could be picked up simply by having a financial floor that you could have for the amount of money coming into schools.
Jonathan Slater
Clearly, if a financial floor prevented a child from getting a poor education, that would be worthy of consideration. However, I do not think it is that simple.
Layla Moran
The chief inspector says she has not seen evidence at school level of funding issues affecting educational standards. Do you agree with her assessment, or do you agree with the many parents—
Jonathan Slater
I bow to her independent expertise on the matter.
Layla Moran
So you’re not concerned that the funding pressures that affect all schools, including academies, might be starting to have an effect on educational standards?
Jonathan Slater
I don’t think it would be useful for me to offer a different view from that of the chief inspector. Clearly, in an individual school, where resources get into difficulty, they find themselves with a problem. That is precisely why we follow up in the way I described earlier.
Layla Moran
Do you back her up that Ofsted needs to be able to look at MATs as well as at individual schools?
Chair
Where is the Department’s thinking on that?
Jonathan Slater
The Department is working at the moment with Ofsted and other stakeholders to look at how best to assure—
Layla Moran
Because we heard clearly yesterday—
Chair
Sorry, just let Mr Slater finish, because I think we need to get this on the record. You are working with Ofsted and others?
Jonathan Slater
We are working with Ofsted and others on the improvements we could make to the way that we assure MAT performance and finance. We have not reached a conclusion on that work at the moment.
Chair
So you envisage the finance bit being done differently by ESFA?
Jonathan Slater
That’s what ESFA does at the moment.
Chair
So what else?
Jonathan Slater
Ofsted inspects at the individual school level. It is increasingly batching its school-level inspections at the MAT level. It has agreed with us some improvements in the way it plans inspections and the way it draws information from the MAT to inform the school inspection, to the extent that the school’s performance is derived from its MAT. It has made improvements of that sort, and we are looking more generally at what further improvements might be made to the question of the contribution of the MAT in respect of performance issues. That is live work at the moment.
Layla Moran
And when will it be concluded? When will we know your final plans?
Jonathan Slater
I don’t have a date, but we are actively working on it right now.
Layla Moran
Before the next school year starts?
Chair
That will be challenging; the next school year will start next September.
Layla Moran
Indeed.
Jonathan Slater
Let me write to you.
Chair
Before you move on, Ms Moran—I will come back to you in a moment—Sir Geoffrey wants to come in.
Sir Geoffrey Clifton-Brown
We know from the evidence that Ofsted has given the Committee that those schools rated as outstanding are often not inspected for 10 years. If an outstanding grant maintained school moves into the MAT sector, would it not be sensible to make sure that that school, which will come under completely different governance arrangements, is actually inspected by Ofsted much sooner than that 10 years?
Jonathan Slater
The Committee has made a recommendation on this matter recently. We are due to respond to that recommendation next month.
Chair
So you are considering it at the moment?
Jonathan Slater
We have a plan, and you will hear from us next month.
Chair
It is good to know that you are listening to our recommendations.
Jonathan Slater
We always listen to your recommendations.
Anne Marie Morris
Very briefly, Mr Slater, clearly there is increasing evidence of a link between the financial position of a school and its academic attainment. Ofsted used to look at finances, but now it does not. Would you be in favour, as many people I have spoken to would be, of Ofsted again taking on the role of looking at the finances and the link between the finances that are there, how they have been spent and the educational outcomes of the school?
Jonathan Slater
It’s not a conversation I am having with Ofsted, to be honest, about whether it should take on the role of my colleagues sitting to my right and left in the way they regulate the finances of academy trusts. They need to work—
Anne Marie Morris
But, Mr Slater, that is not the point. I appreciate that there is regulation and a different body, but there is nobody pulling together academic attainment and finance. We are not going to get an answer to this underfunding issue and the issue of schools managing their finances unless you can put the two together; we are not going to get the results. I ask you again: do you accept that and will you talk to Ofsted, and indeed our regulators, about that?
Jonathan Slater
The Department has responsibilities to oversee both the performance of trusts and their finances. That is done through regional teams of people and there is very close collaboration between Eileen and Mike’s finance people and my performance people, who work together and will look trust by trust at whether, if we have performance concerns and finance concerns, they come together. We try to join up. I don’t think—
Anne Marie Morris
Mr Slater, you have sort of missed the point.
Eileen Milner
Could I add something? I don’t know if it is helpful to you, but can I talk to you a little bit about what we do in practice? I hope that might be reassuring to you. As Jonathan has explained, we are part of the DfE family; we work incredibly closely together, with performance and economy as two sides of a coin. We work incredibly closely on that. I would not want you to think that we do not work closely with Ofsted, because we do, and where we have issues of financial or governance concern that come to us, we will quite routinely have conversations with Ofsted about where on its radar and its assessment of risk a particular trust or school is appearing. I would not want you to think that we are sitting back and being essentially separate and not taking responsibility for asking questions of one another. They do the same to us. I think that is healthy, and it is something we are building on all the time.
Anne Marie Morris
I am delighted to hear that, but we still have not got to the issue of whether the lack of funding for a school has an impact on its performance. You are talking, on the basis of the money it has and the money it has been allocated under the current funding formula, about whether it has spent that money wisely. This is a different question. It is about looking at the school and saying, “Given the resources it has, the staff and the money, is the lack of one or the other an issue that impacts performance?” That is not something that you have said. If you can tell me that is what you do, I am delighted, but I don’t think you do that now and I don’t think Ofsted does it either.
Mike Pettifer
We don’t do it as an inspection, but our business as usual operation is that the regional schools commissioners and my teams look jointly at the academy trusts. They look at finances and they look at educational performance together. But it is not an inspection.
Anne Marie Morris
But can I ask you, when you look at finance—
Chair
We don’t want to replay everything about Whitehaven again, because we went through that a lot on Monday, but that was an example where performance was going down, there were clearly financial problems and all sorts of other issues that we will come on to in a moment. That was not picked up quickly enough, and children’s lives have been ruined.
Mike Pettifer
No, there wasn’t a good enough job done there.
Chair
Ms Morris is suggesting an alternative approach.
Mike Pettifer
We are working actively with them and trying to put a good solution in place, and we are in the process of doing that.
Chair
We will come to the detail of Bright Tribe in a moment, but that shows a failure—a particularly bad example of a failure. However, there are a lot of things that may be less than optimal in schools prior to a failure that you are not seeing because of the way you split the regime. We just really want to test what the thinking is in the Department.
Jonathan Slater
We don’t think that a problem facing the school system is that Ofsted doesn’t inspect the finances of the school.
Chair
But when they inspect, sometimes, they will make a criticism in their inspection that is valid in terms of education, but sometimes it is because those schools have not been able to recruit a teacher.
Layla Moran
If I may give an example, as I say, I am a governor of a primary school and we were told that some of our issues were financial, but Ofsted could not really do much about it. Then it was suggested to us that we fundraise more to fill the gap. That should not be the case. They were not looking forensically at our accounts. That is exactly the kind of example we are giving.
Jonathan Slater
All I am saying is that I don’t think that the right way forward is to turn Ofsted into an organisation that gets into the forensic detail of schools’ finances. That is our job; we need to do it, and that is what we are doing.
Chair
We’ll leave that for now, but I think you hear what we are saying.
Layla Moran
I have one final question that neatly ties into what we have just discussed. This is just really unclear, especially for parents and students out there: when it all goes wrong financially, where does the buck stop? It is all very well to say that it stops with you, Mr Slater, in the Department, but by that point there has been a catastrophic failure. When there are whistleblowers in a school, when people are shouting to the rafters that something is wrong, who do they go to concretely? I ask because we heard examples of the regional schools commissioner not writing back.
Chair
Yes, where does the buck stop, or where should it stop?
Jonathan Slater
Obviously, it depends on the circumstances, but the governing body of the trust is accountable to Parliament, albeit through me, for their use of resources. As you know, they are required to appoint an accounting officer—that is set out in the Academies Financial Handbook—who is, as I say, accountable, through me, to Parliament for how they use their resources. That is what we expect them to do, and we hold them to account. In the vast majority of cases, as we have discussed, they do their job well. But if they don’t, we intervene, and increasingly we are seeking to intervene before it has gone wrong. We will follow the action wherever it needs to go. You were discussing on Monday the case of a trust where we are at the moment carrying out investigations, and if they need to go to the police, they will go to the police.
Layla Moran
Are you confident that there are enough governors, in all the multi-academy trusts in the whole country, who have the right skills to be able to manage this stuff? Are you absolutely confident of that?
Jonathan Slater
It’s a continuing role of the Department to increase and improve the capacity and capability of MAT governance.
Layla Moran
How?
Jonathan Slater
Well, I was discussing with one of your colleagues the need to improve training and the actions we are taking. We put resources in place. We fund MAT capacity development where new people need to get recruited. If we are asking a multi-academy trust to take on an extra school, they will need to invest in governance capability to take it on, and we will fund them to do so.
Chair
The thing is, you can say the buck stops with governors, but if you were at Whitehaven, you had ARC, which was the regional bit of the board, but it still wasn’t at school level, and they were finding it very hard to get information from that. I’m talking about getting information from a trust that is running 13 or so schools around the country. It is a long way away from the community that it serves. Do you not think there is a gap there? You say the buck has to stop with governors first. For some people, the gap between where they are, in the school in their area, and the governing body or the trust is very large.
Jonathan Slater
And so there is a requirement in place for the governing body of a multi-academy trust to have parental representation, either at the trust board level or at the individual school level. There is a requirement on the trust to put in place a proper scheme of delegation: which decisions get made at trust level and which at board level? There is a requirement for there to be a complaints procedure if there are concerns that that is not being applied, and a right of appeal to the Department. I am absolutely not saying that those arrangements are always applied in all cases. In the case of Whitehaven and the Bright Tribe trust, they clearly weren’t—they clearly weren’t.
Layla Moran
So your assertion is that, had they followed your guidance, Whitehaven would absolutely not have had the issues that it had. Is that fair?
Jonathan Slater
Absolutely.
Chair
We won’t get into all the structural stuff about what the role of regional schools commissioners is at this point. That is not directly relevant to today’s hearing, but you have heard that parents in a school where there are problems feel very isolated—it was a long way from Whitehaven to Whitehall.
Jonathan Slater
Sure. I became the director of education in a local authority 20 years ago because I wanted to spend my career helping to improve the life chances of children. Three years ago, when I took the job in the Department, I got the chance to do so again, and when I see that happening, I’m angry about it, as you are.
Chair
Well, you’re in a position to resolve it to a degree. Can I move on? While we are on the subject of Bright Tribe, there are obviously investigations ongoing. Angela Barry told us on Monday that she was about to publish a couple, but she did not want to go into detail. Have you seen those reports yet?
Jonathan Slater
They’re being finalised. That work is not yet complete.
Chair
You said to us before that if there was evidence of malpractice you would try to get the money back from Bright Tribe. Is that still your position?
Jonathan Slater
Yes.
Chair
How are you going to do it? Given that there were a number of family-run companies, do you think that there is any real prospect of getting the money back from companies that could go into liquidation before the reports are published? It has been quite a long time coming.
Jonathan Slater
I’ll be going after the money—on the basis of an investigation report that is not yet complete. There is no lack of ambition in our Department. We will report back to you once that has been finished.
Chair
If you report back to us the minute you do something that would be good, even if you are not in front of us at that point, because we are very concerned.
Jonathan Slater
Of course.
Chair
That brings me to the point about what sanctions you or anyone has against chief executives or trustees. We saw that the former head of Perry Beeches has been barred from teaching. That is a sanction if you are a teacher, but a lot of these people are not in the teaching profession, so what sanctions are there? If there was criminal action, that would be criminal, but for anything short of criminal, what is the sanction?
Jonathan Slater
People can be banned from teaching and they can be banned from governance, and we have done both of those things.
Chair
So banned from governance of a school, but could they end up at an FE college for instance—still under your remit, Ms Milner? If I were a dodgy governor at a trust, would I end up at the FE college down the road a week later if I was barred from governance?
Eileen Milner
What we are working to do—
Chair
Just in answer to that question, could a governor recycle as a governor in another education—
Eileen Milner
It is not impossible that a governor could recycle. I say to you very honestly that it is not impossible. We are seriously seeking to uncover in a systematic way the names of people under whose watch irresponsible things happen, and to be able to get in front of situations where they might pop up on other boards, start-up businesses that could be trading in areas that we oversee and regulate, or indeed instances where we are so gravely concerned that we are able to work with both the Charity Commission and the Insolvency Service to see if we can get them disqualified as directors. That is actually quite a big sanction, and one where I am grateful for the work that BEIS in particular are giving us on how we might set about doing that in a systematic way.
Chair
That would therefore be on the public list.
Eileen Milner
Indeed.
Chair
At the moment, where is the naming and shaming of people who have taken taxpayers’ money, not delivered an education, not repaired a school, and sometimes allegedly—I think we have to say that at this point—lined their own pockets?
Jonathan Slater
The reason you know about what has happened to the guy who you mentioned is because that is public. It is public if the teacher misconduct panel bans someone from teaching, and ditto on governance. That is public information.
Chair
But you could still continue in your day-to-day job. You could be a business person or, indeed, working in a school somewhere as a teacher but not be a trustee. On the actual sanctions against someone who has taken taxpayers’ money and misspent it, what about malpractice in public office? Would that cover these individuals? Is there any legal thing you need to make sure that the chancers who try to take advantage—and, indeed, we think have taken advantage—of the system actually get their come-uppance and have real sanctions against them?