Ministers back down on schools levy

Ministers have backed down over plans to levy a 5 per cent tax on schools with unspent cash, after a revolt by head teachers who argued they were being penalised for sound financial management.

But the government faced anger from some teaching unions, which accused the government of giving in to “vested interests” at the expense of school staff – who account for the bulk of schools’ costs – and their pupils.

Jim Knight, the schools minister who announced the climbdown, was bound to anger at least one powerful interest group whichever path he chose. His decision to risk the wrath of classroom teachers’ unions by coming down on the side of school heads partly reflects the government’s view that head teachers should have more power. But it may also show fear at the uproar in middle England over the proposals to impose the special tax on schools.

Mr Knight on Tuesday said he had withdrawn plans for a 5 per cent tax on schools’ unspent cash, having “listened carefully” to “a range of stakeholders”. But he warned, somewhat vaguely: “My department will continue to monitor the overall level of surplus balances during the forthcoming spending review period [which ends 2010-11]. If the levels reported do not show a significant reduction, we will come forward with further action.”

The Department for Children, Schools and Families explained that “further action” did not mean a return to the 5 per cent tax. But it declined to comment on what form further action might take, or exactly how long ministers would give schools to change their policies before resorting to punitive measures.

England’s schools had a net £1.6bn surplus in March 2006 – a figure that has been climbing steadily. The DCSF estimates it grew again in the year to March 2007, and intended to levy a retrospective tax covering the March 2007 balances. The money would have been recycled to other local schools.

School heads say they are underspending either to pay for capital projects that take more than one year to finance and frequently more than a year to complete, or to hold money aside for financial crises. Ministers say if the money is not being spent, children are being short-changed because there is less money to pay for teachers.

Martin Johnson, acting deputy general secretary of the Association of Teachers and Lecturers, said: “ATL fully supports the principle of a levy on excessive school balances, particularly since the majority of schools stand to gain.” Chris Keates, general secretary of the NASUWT, representing mainly classroom teachers, described the climbdown as “extremely disappointing”. “This was never going to be a universally popular move and vociferous discontent from those with vested interests could have been anticipated,” he said.

● Gordon Brown is expected on Wednesday to defend government plans to get more people into universities. Its long-term “aspiration” is that 50 per cent of young people should go into tertiary education. He is also expected to condemn “failing schools”.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.