Converting schools to academies inquiry

The checks that the Department carries out before schools convert to academies have not prevented a succession of high-profile academy failures that have been costly to the taxpayer and damaging to children’s education. When an academy fails the Department must intervene to find a new sponsor; it ‘re-brokered’ 2.5% of academy schools in 2016–17. As we have reported previously, the cost to pupils and the taxpayer of failure are particularly high for multi-academy trusts. Some trusts have experienced very serious problems, including well-known examples such as the Durand Academy Trust, Wakefield City Academies Trust and Bright Tribe Trust which ran Whitehaven Academy. The Department accepts that, at Whitehaven, for example, parents have been let down by management that has not been up to the task. It tells us that it is putting in place a new sponsor for Whitehaven but concedes that, with any academy trust that fails and has a financial deficit, the deficit has to be covered with additional public funding. The Department recognises that in the past it has focused on converting large numbers of schools quickly. We consider that this has been at the expense of rigorous due diligence checks and risk assessment. More recently the Department has strengthened its scrutiny of the financial health of prospective academies, although it acknowledges that there is still more to be done. Recommendations: The Department should review academy trust failures to identify lessons for its scrutiny arrangements. It should write to us by October 2018 setting out the main reasons for the failures and how it proposes to strengthen its scrutiny of prospective academies and sponsors to ensure that risks are being well managed before and after conversion. The Department should set out how it plans to improve transparency for parents, to ensure they have access to information and are built into the accountability system. The Department should inform us whether it is still considering whether parents should become members of academy trusts to help with transparency issues.

Some schools that are required to or want to become academies find it difficult to attract potential sponsors or find multi-academy trusts to join. The Department is of the view that it is important to convert good and outstanding schools to academies so that, as part of multi-academy trusts, they can support the underperforming schools in the trust that need most help. In addition, small schools in particular can potentially benefit from the economies of scale offered by joining a multi-academy trust. Some small rural primary schools are unattractive to multi-academy trusts because they are financially vulnerable or geographically isolated. Academy trust boards have a legal responsibility to keep their trusts solvent, meaning that they are not willing to take on schools that appear financially unsustainable. Small schools can also place a relatively greater administrative burden on academy trusts than large schools, relative to the income they contribute to central costs, and they may be less able than larger schools to add value to the trust. Schools that Ofsted has rated as inadequate must convert with the support of a sponsor but there is a shortage of suitable sponsors with capacity to provide effective support, particularly in the north of England. 6 Converting schools to academies Recommendation: The Department should set out a clear plan by October 2018 detailing how it will support schools that want to convert to become academies, including how it will overcome barriers faced by small rural schools. The Department needs a clear set of options including an option for schools that cannot secure a sponsor or find a multi-academy trust to join.

Local authorities can incur significant costs when schools become academies, which affects their capacity to support their remaining maintained schools. The Department does not collect data on the costs incurred by local authorities in supporting the conversion process. A survey by the Local Government Association suggests that the average cost to local authorities, in terms of staff time and spending on things such as legal fees, has been between £6,400 and £8,400 for each maintained school that becomes an academy. Some local authorities have chosen to charge schools fees to recover these costs; evidence suggest the charges may range from £2,500 to £20,000 per school. Local authorities also retain any financial deficits accumulated by those schools directed by the Department to become academies because they have been rated as inadequate by Ofsted. The National Audit Office estimates that the total cost to local authorities of these deficits was approximately £7.8 million in 2016–17. In 2017–18, the Department withdrew funding (worth £77 per pupil in 2016–17) that it had previously provided to local authorities for school support and improvement services. We heard that local authorities now tend to focus their limited resources on the weakest maintained schools, leaving good schools with little support. Recommendation: The Department should develop a better, up-to-date understanding of the costs that local authorities incur as part of converting schools to academies, and the extent to which these are accurately reflected in the fees charged to schools. It should use this information to assess whether it should contribute to the costs that local authorities incur.

Local authorities’ ability to fulfil their statutory responsibilities, including their duty to provide school places, is undermined in areas where a high proportion of schools have become academies. The proportion of schools that have become academies, and the relative proportion of primary schools and secondary schools that are academies, varies widely across the country. In Bromley, 93% of schools are academies, compared with just 6% in Lancashire, Lewisham and North Tyneside. Nine local authorities have no maintained secondary schools and over a third of local authorities have fewer than 50 maintained schools. Regardless of the extent of academisation, local authorities still retain important statutory responsibilities, including a duty to ensure there are enough school places for local children. However, they have no control over the number of places in academy schools. There can be particular challenges in finding appropriate places for looked-after children. The Department emphasises that it is vital for regional schools commissioners and local authorities to work closely together, and says that that three-quarters of multi- academy trusts have formal relationships with local authorities. Recommendation: The Department should require all academy trusts, as part of their funding agreements, to work with local authorities on school place planning and school admissions, including for vulnerable groups of children. The Department should also outline how this will be monitored. Converting schools to academies 7

The Department’s arrangements for oversight of schools are fragmented and incoherent, leading to inefficiency for government and confusion for schools. A large number of disparate people and organisations—including the Department, regional schools commissioners, the Education and Skills Funding Agency, Ofsted, local authorities, education advisers, multi-academy trusts and church dioceses— are involved in supporting schools’ conversion to become academies and overseeing their subsequent educational and financial performance. It is clear that, from schools’ perspective, the oversight system is confused and can be burdensome. In May 2018, the Department recognised, in announcing a consultation on the accountability system for schools, that school leaders can feel accountable to multiple masters, with different demands placed on them. Furthermore, fragmented systems for sharing information between the Department and the Education and Skills Funding Agency increase the risk of duplication of effort, error or omission, meaning that decisions about converting schools to academies or matching schools with sponsors are not as soundly based as we would expect them to be. Recommendation: The Department should set out, as part of its consultation on school accountability in autumn 2018, how the Education and Skills Funding Agency and regional schools commissioners will work together more effectively. Its proposals should (i) identify and address unnecessary burdens on schools, and (ii) ensure that oversight of schools is made more coordinated and effective. 8 Converting schools to academies 1 Supporting local schools

The Department told us that one of the lessons of the past few years was that there is a trade–off between speed and quality. It had focused on increasing the number of academies quickly, but this had created risks and some academy trusts had subsequently encountered problems that the Department had needed to manage. The Department confirmed that it had to provide funding when academies failed, but that it had not set money aside just in case there were further failures.12 The National Governance Association agreed that, where things had gone wrong, in part it was because growth had been pushed too fast and some trust boards had not undertaken due diligence checks properly. It argued that the Department needed to be more honest and transparent about reviewing instances where academy trusts had failed and about learning from mistakes.13

The Department told us that it collected information about risk in sponsor trusts to help mitigate the risk of trusts failing.14 The most recent data, up to 2015/16, show that the Department had assessed 15% of existing sponsors as high risk and 55% as moderate risk.15 We asked the Department whether it was worried by these figures. The Department argued that this position showed that it was thinking carefully about the capacity of multi- academy trusts to take on new schools, and that the figures illustrated the challenge for multi-academy trusts of expanding to support additional schools.16

Headteacher boards, which advise regional schools commissioners about applications to convert to academies, previously considered just one year’s forecast financial data. The Department highlighted that, since March 2018, headteacher boards have required all schools applying to convert, and the multi-academy trust if schools are applying to join one, to set out a three-year financial forecast, so there was more data than there used to be to inform the assessment of applications.17 The Department conceded, however, that it would be foolish to claim that there would not be any more governance or financial failures among academy trusts in the future.18 7 Qq 72, 105; National Education Union (CSA0001), para 43 8 Qq 64–67 9 Q 67 10 Q 69 11 Q 70 12 Qq 70, 85 13 Q 28 14 Q 74 15 Q 73; C&AG’s Report, para 3.18 16 Q 73 17 Q 82 18 Qq 86–88 10 Converting schools to academies

Although academies take on significant new financial responsibilities, the Department does not carry out its own checks to ensure that all trustees and senior leaders are fit and proper persons.19 We asked why, given the extent of problems, the Department does not carry out due diligence checks for all academy trustees and senior leaders for every school that becomes an academy. The Department said that it checks new trustees, but that it does not carry out tests for governors and headteachers who have already been running maintained schools. It committed, however, to think again about the extent of the checks that it carries out.20 Schools that are most in need of support

Most academy schools now join multi-academy trusts, and the Department sees this as a way of encouraging collaboration between schools in order to improve educational standards and secure efficiencies.21 We heard from the National Governance Association, the Devon Association of Primary Heads and the Northern Education Trust that multi- academy trust boards carry out due diligence to understand the issues they are taking on and that trusts do not automatically accept any school wishing to join. Critically, because trustees have a legal responsibility to keep the trust solvent, it would be irresponsible for them to take on a school knowing that it was not financially sustainable.22

The Devon Association of Primary Heads observed that larger schools can bring stability and skills to academy trusts, making them more attractive than smaller schools that can need an amount of central support out of proportion to what they contribute to the trust’s central costs.23 We asked if this meant that multi-academy trusts were taking on only financially robust, well-resourced schools, leaving local authorities to continue to support smaller and more vulnerable schools.24 The Northern Education Trust told us that almost all of its schools had been in financial difficulty, because it had taken on schools in special measures or with serious weaknesses.25 For some schools, a significant amount of money might be required for redeployment of staff, redundancy costs or building works.26 The Devon Association of Primary Heads noted that if schools were a good fit with the rest of the trust, boards would want to find a way to bring them in, but only if they believed they could restructure the schools to make them solvent.27

The Department accepted that finding the right sponsor for a school could be difficult and take time, and that it could be harder in some parts of the country than in others.28 Written evidence from the National Governance Association supported the National Audit Office’s finding that how near to each other schools in multi-academy trusts are is important to their success. However, particularly in the north of England there are relatively few sponsors near underperforming schools.29 19 C&AG’s Report, para 16 20 Q 72; C&AG’s Report, Recommendation b 21 C&AG’s Report, para 1.18 22 Qq 18, 20, 23 23 Q 17 24 Q 22 25 Q 23 26 Q 20 27 Qq 19, 24–25 28 Qq 75, 81 29 National Governance Association (CSA0004), para 4.1; C&AG’s Report, paragraphs 19, 3.11, 3.13, Figure 11 Converting schools to academies 11

The Department has taken longer than intended to convert a sizeable proportion of underperforming schools: 63% of maintained schools rated as inadequate between April 2016 and March 2017 had not opened as academies nine months later.30 In written evidence, London Councils raised concerns that inadequate schools had been unable to find sponsors, despite working closely with the regional school commissioner, and that in some cases local authorities had needed to broker interim arrangements on the school’s behalf.31 The Department explained that the time schools take to become academies is related to the number of academy schools in the area, the capacity of sponsors to take on more schools, and local factors such as the role of church dioceses that may control land.32

Small rural schools, particularly primary schools, can face particular difficulties in finding suitable sponsors.33 Low pupil numbers may make rural schools financially unviable and their geographical isolation can make it more difficult for multi-academy trusts to provide support.34 The Department told us that, since 2010, 1,379 rural primary schools had registered an interest in becoming an academy. Of those, 984 had gone on to apply to become an academy, including 262 that were small rural primary schools.35 We asked what, particularly for small rural schools, the barriers were to becoming academies and how the barriers could be addressed. The Department told us that, in principle, the opportunity presented by a joining multi-academy trust should be greater for a smaller school than a larger one, because there was the potential to achieve more economies of scale.36 It was seeking to draw attention to small schools that were working together successfully, citing Peterborough diocese rural schools as an example. It said that it was doing further work to identify what practical steps schools might take, which it expected to publish early in the new year.37

The Department stressed that it needed good and outstanding schools to join academy trusts to provide capacity to support schools that need to improve.38 We heard from both the National Governance Association and the Devon Association of Primary Heads, however, that some well–performing schools do not want to convert. One reason is that some school governing bodies do not want to become part of a bigger institution in which they would have less of a role.39 The Devon Association of Primary Heads added that, for a small school that is already working well, becoming an academy can seem burdensome.40 The National Governance Association said that the Department had not emphasised enough the benefits of schools coming together in federations or multi-academy trusts: specifically that schools could learn from each other and share resources, teachers and good practice. These were the things that would make a difference to children.41 30 C&AG’s Report, para 18 31 London Councils (CSA0002), para 5 32 Q 81 33 West Sussex County Council (CSA0006), para 10; C&AG’s Report, paras 3.9–3.10 34 C&AG’s Report, paras 3.9–3.10 35 Qq 119–120; Department for Education (CSA0007) 36 Q 120 37 Qq 124–125; Department for Education (CSA0007) 38 Q 76 39 Qq 15, 20 40 Q 17 41 Q 15 12 Converting schools to academies 2 Consequences for the school system in England

The Department told us that it expected around 1,000 maintained schools to become academies in both 2018–19 and 2019–20.42 This means that there will continue to be a substantial number of schools overseen by local authorities for the foreseeable future.43 The Department highlighted that, because most schools have a choice as to whether they become an academy, it could not be confident about what would happen in the future.44 We heard from the Devon Association of Primary Heads and the Northern Education Trust that, because the policy around converting schools to academies had changed, more clarity about the role of local authorities was needed.45

The National Governance Association contrasted the Department’s original policy that encouraged schools to become autonomous, stand-alone academies with its current approach of encouraging schools to join a federation or a multi-academy trust. The National Governance Association said that the school system had not adjusted to that change. For example, the national funding formula was about individual schools, but a multi-academy trust with several schools was one organisation.46 Parents should not, therefore, think that their academy school was always entitled to a certain amount of money, because that was not how the funding system worked. The Association also told us that engagement with parents was a really important issue, commenting that parents are not built into the accountability system enough. It said it was discussing this issue with the Department and had proposed a model where the parents should become the members of the trust.47 The costs of converting schools into academies

We asked whether there was evidence to suggest that tackling underperforming schools by directing them to become academies was better value for money than providing a rescue package for them inside a local authority. The Department argued that it is difficult to look at a counter-factual to compare academisation with what would have happened if schools had not converted. It told us that seven out of 10 sponsored academies—those that had been struggling before—were now rated as good or outstanding. It also commented that it might well have been possible to achieve that improvement in a different way. The Department said that it could not prove whether converting underperforming schools to academies had been better value for money than leaving them as maintained schools, but made the point that nobody could.48 It noted that educational standards would not improve simply through the process of conversion, but emphasised that academies were intended to create the governance and collaboration arrangements that were needed to achieve school improvement.49

Between April 2010 and December 2017, the Department spent an estimated £745 million on the one-off transitional costs of converting schools to academies. Spending in 42 Q 129 43 C&AG’s Report, para 14 44 Q 148 45 Qq 12, 15, 38 46 Q 15 47 Qq 50, 51 48 Qq 101, 103–104, 137 49 Q 134 Converting schools to academies 13 2016–17 was £81 million. Schools converting without a sponsor receive a flat-rate grant of £25,000 to help them pay for costs including legal fees, new systems, and finance and administration costs. Legal fees typically represent the largest share of these costs.50 The costs that schools actually incur vary. The Department told us that it believes that the £25,000 grant is not sufficient to cover all costs for the average school, but that it wants to incentivise schools to complete the conversion process as cost-effectively as possible.51 Academy trusts that sponsor underperforming schools receive much larger conversion grants.52

The Department does not collect data on the costs that local authorities incur when their maintained schools convert to academies. A survey by the Local Government Association in 2016 indicated that local authorities’ costs vary, but that average spending was between £6,400 and £8,400 for each school.53 In written evidence, West Sussex County Council said that it estimated that it had cost the council a total of £640,000 to convert schools to academies.54 The Department said that it was keen for local authorities to minimise their costs, and noted that local authorities could, if they chose, bill schools accordingly.55 The National Audit Office found that the fees that local authorities were charging ranged from around £2,500 to £20,000 per school.56 Written evidence from the Catholic Education Service said that one London authority was proposing a charge of £15,000, an amount that would be considered prohibitive for most schools since the £25,000 conversion grant might already be insufficient to cover the costs that schools incurred.57

Local authorities also retain any accumulated financial deficits of maintained schools that are directed to convert to academies with a sponsor.58 The Department told us that it wanted to create incentives for local authorities to minimise the number of maintained schools getting into deficit, through good medium and long-term financial management. It did not want the Department to pick up deficits because local authorities had failed to run their schools properly.59 The National Audit Office estimated, based on averages, that the cost to local authorities of deficits from schools that were directed to convert with a sponsor was approximately £7.8 million in 2016–17.60

The Department has now withdrawn the general funding rate for local authorities and academies for school support services. This was previously paid through the Education Services Grant and was worth £77 per pupil in 2016–17.61 The Devon Association of Primary Heads told us that local authorities now had limited capacity to support good schools to improve. Local authorities prioritised the schools most in need, meaning that good schools received less support.62 In addition, local authorities often used their good schools to support their failing schools. Therefore it was necessary to keep a good mix of 50 C&AG’s Report, paras 2.8–2.9, 2.12–2.13 51 Qq 115–116 52 Q 25; C&AG’s Report, para 2.15 53 C&AG’s Report, paras 2.11, 2.17. Average spending was £6,400 per primary school converting with a sponsor (£6,900 without), £8,400 per secondary school converting with a sponsor (£7,300 without). 54 West Sussex County Council (CSA0006), para 6 55 Q 114 56 C&AG’s Report para 2.18 57 Catholic Education Service (CSA 0003), paras 10, 21 58 C&AG’s report, para 2.20 59 Qq 111, 113 60 Q 112; C&AG’s Report, para 2.20 61 C&AG’s Report, para 1.23 62 Q 8 14 Converting schools to academies schools, in both the academy sector and the maintained sector.63 Written evidence from London Councils and the National Governance Association also said that local schools becoming academies and the reduction in the Education Services Grant meant that local authorities were now less able to support maintained schools.64 Local authorities’ responsibilities

The proportion of schools that have become academies, and the relative proportion of primary schools and secondary schools that are academies, varies widely across the country. At January 2018, 93% of schools in Bromley were academies, compared with just 6% in Lancashire, Lewisham and North Tyneside. Nine local authorities had no maintained secondary schools and over a third of local authorities had fewer than 50 maintained schools.65

Regardless of the local mix of academies and maintained schools, local authorities retain critical responsibilities, in particular a statutory responsibility to secure sufficient school places.66 In written evidence, London Councils told us that councils’ ability to fulfil core responsibilities, such as safeguarding, the Prevent programme, admissions and support for children with special educational needs and disabilities, could be put at risk if an academy did not want to engage with them. Local authorities could not, for example, direct academy schools to expand when they had capacity to do so and there was a need for more school places.67 The Northern Education Trust said that school place planning was difficult when there were academies and local authority schools; it could work only if there were good relationships.68 The Department said that three-quarters of multi- academy trusts had formal relationships with their local authorities, and 87% of single academy trusts were working with councils and other trusts.69

We asked specifically about arrangements for placing looked-after children in areas where all secondary schools are academies. The Department assured us that it expected looked-after children to be the top priority, whether the school concerned was a maintained school or an academy.70 It noted that the Secretary of State could direct academies to take looked-after children, but accepted that the process of complaining and appealing, starting with academies’ internal procedures, could be too slow.71 Co-ordination between government bodies

A large number of bodies and individuals are involved in the conversion process and subsequent oversight of academy schools and academy trusts, including the Department, regional schools commissioners, the Education and Skills Funding Agency, Ofsted, local authorities, education advisers, multi-academy trusts and church dioceses.72 In May 2018, the Department acknowledged that school leaders can feel accountable to multiple masters, 63 Q 37 64 London Councils (CSA0002), para 7; National Governance Association (CSA0004), para 2.7 65 C&AG’s Report, paras 1.20, 1.22, Figure 7 66 Q 129 67 London Councils (CSA0002), para 4 68 Q 30 69 Q 129 70 Q 140 71 Qq 141–142 72 C&AG’s Report, para 1.9, Figure 4 Converting schools to academies 15 with different demands placed on them. It made a commitment to remove duplication and be clear which body is playing which distinct role, and said that it would work with stakeholders to develop detailed proposals for consultation in autumn 2018.73

The Department and the Education and Skills Funding Agency use a variety of documents and multiple spreadsheets and databases to store and share information about academies, creating a risk of duplication, error or omission.74 The Department told us that, in the past, different teams had gone into schools to assess educational performance and financial performance. It said that educational and financial expertise were different but related; it wanted these experts to work together and have one conversation with academy trusts. There was no reason why this should not happen, because ultimately regional schools commissioners and Education and Skills Funding Agency staff were all working for the Department.75 The Department assured us that officials were working together closely on the ground.76 73 Department for Education, Principles for a clear and simple school accountability system, 4 May 2018 74 C&AG’s Report, para 2.7 75 Q 99 76 Qq 95–96 16 Converting schools to academies