This blog discusses the financial support for education providers during the Coronavirus crisis, with particular focus on how education establishments with mixed income from (government and commercial sources) can expect to approach the current situation in light of the financial difficulties raised by the Coronavirus pandemic.
Following a government announcement in March, schools have been shut and classroom learning stopped for the vast majority of students from 20 March. Where possible, children of critical care workers and children regarded as vulnerable have been able to attend school.
The Prime Minister recently announced his “conditional roadmap” for gradually adjusting and easing the lockdown restrictions. Whilst the rate of infection currently remains too high to allow the reopening of schools for all pupils, the plan anticipates that a phased return for early years settings and schools will begin from 1 June. The Government expects children to be able to return to early years settings, and for Reception, Year 1 and Year 6 to be back in school in smaller sizes from this date. However, as emphasised by the Prime Minister, this plan is very much conditional on the development of the virus, and will be frequently reviewed. Many education providers, who have been significantly affected by the Coronavirus pandemic, will therefore continue to be concerned about access to funding arrangements and financial support.
What financial support for education providers is there?
We set out below financial support measures put in place for education providers as announced by the government in their “Coronavirus (COVID-19): financial support for education, early years and children’s social care” guidance note.
School funding summary
Many education providers receive funding from the government, and also through private commercial income generated through, for example, hiring out their sports halls, performance spaces and swimming pools. For schools maintained by a local authority, government funding comes mainly in the form of the Dedicated Schools Grant (DSG). A proportion of this is then often deducted (“recoupment”) and then given to non-maintained schools such as academies and free schools by the Education and Skills Funding Agency (ESFA). Independent, private schools are, in general, funded by fee income paid by parents and so do not receive a majority of their funding from the government.
Financial support schemes due to COVID-19
The Government has reassured education providers in receipt of the DSG that this will continue to be paid “to ensure business continuity and payment of staff.” Academies will also continue to receive their budget for the year. Where the funding continues to be paid, the Government expects education providers to continue to provide their service in so far as is possible, which will of course have to be adjusted from normal practices to take account of Government guidance.
Alongside their continued provision of the DSG, the Government has introduced a number of financial measures to support both public and private organisations in coping with the strain COVID-19 has placed on the economy, which many education providers will be able to access. Such measures include:
- the Coronavirus Business Interruption Loan Scheme (CBILS);
- the Coronavirus Large Business Interruption Loan Scheme (CLBILS);
- the COVID-19 Corporate Financing Facility (CCFF);
- the Coronavirus Job Retention Scheme (CJRS)
For further information in relation to the available schemes, please visit our Funding/Loan section of our dedicated Coronavirus page.
The government expects all relevant organisations to first consider their options to maintain financial security by reducing their operating costs and securing commercial loans (including, through CBILS, CLBIS, and CCFF) before accessing the grant available through the CJRS.
Education providers with mixed income
For education providers classified as public sector (which includes schools maintained by a local authority and academy trusts), who will continue to be in receipt of funding, the Government has announced that staff should not be furloughed.
However, some state funded schools may, as outlined previously, receive both funding from the government and from private commercial sources. Where there is also a private income which has reduced or even ceased due to COVID-19, it may be necessary and appropriate to furlough staff who would normally be paid from that private income, subject to 5 conditions:
- The employee works in an area of business where services are temporarily not required and where their salary is not covered by public funding;
- The employee would otherwise be made redundant or laid off;
- The employee is not involved in delivering provision that has already been funded;
- (Where appropriate) the employee is not required to deliver provision for a child of a critical worker and/or vulnerable child; and
- The grant from the Coronavirus Job Retention Scheme would not lead to financial reserves being created.
Where the above 5 conditions are met, the schools should receive a grant from the CJRS which matches the proportion of its paybill which would be considered to be funded by the school’s private income.
By way of example, if the school’s average monthly private income stream (for example, from hiring out its sports hall) provides 5% of the school’s overall income, the school could claim support through the CJRS for up to 5% of its paybill, after exhausting the other financial options first from reducing costs and redeployment. This would be done by furloughing staff whose usual salary or combined salaries are linked with the income lost and come to no greater than 5% of the provider’s total paybill.
Given that the CJRS has now been extended until the end of October, schools with mixed income can take some reassurance that their funding will continue and there is additional support they can potentially access. The Government has stated that the scheme will continue in its current form until the end of July and then changes to allow for greater flexibility (such as the ability for staff to work part-time), will be introduced from the start of August. However, we are awaiting further clarity and specific details in relation to the extension, which should be released by the end of this month.
If you would like further guidance in relation to this topic, please contact a member of the Employment team.
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This blog was co-written by Adam Wheal, Trainee Solicitor and Claire Merritt, Partner.