School budget setting season is nearly upon us. In this article, we highlight some key points that aim to support budget planning assumptions.
The Facts
This country, like many across the world, entered a recession for the first time in 11 years in 2020.
The office of budget responsibility reported the Consumer Prices Index (CPI) increased by 10.5% between December 2021 and December 2022.
This means, the average price of goods and services is 10.5% more expensive than a year ago.
The government has set a target for CPI inflation of 2%, however the Bank of England currently forecasts inflation to remain high into 2023 as global and domestic factors continue to hit hard. Forecasts from the Bank of England and the Office of Budget Responsibility currently estimate inflation in 2023 to be between 5% and 7%.
As the forecast is more than 1% over target, the Governor of the Bank of England reports in an open letter to the government, the reasons for higher than targeted inflation.
The Bank of England is taking steps to manage inflation. So far, these have included a series of interest rates rises from a rate of 0.25% in December 2021 to the current official Bank Rate of 3.5% (December 2022).
School staff pay scales have increased in value between 5% and 10% during 2022.
Industrial action could impact wage budgets further.
What to plan for?
Reasonably, it should be expected that expenditure budgets will be higher by at least 10%. Each expenditure line heading will have specific factors influencing this. For example, energy bills have increased by anywhere between 30% and 50%.
Review your school contracts. Some contracts will be a fixed price over a longer period. Some contracts will increase annually and may have reference to inflation e.g. CPI.
Having a clear understanding of the basis of your contracts will be useful for a detailed planning process.
Consider holiday entitlements for part- year and irregular- hours workers; what is the current position and how will this impact budget planning?
Our previous article in respect of managing the increasing cost of energy may be of help: Support with Energy Bills | Schools’ Choice – Flexible & Affordable Education Support Services (schoolschoice.co.uk)
We will be holding workshops on 6th February 2023 for our customers, where we will be discussing some of the issues which are likely to influence your budget planning process.
Our experts will provide advice on the key areas to consider during these uncertain times.
Further details on the timings of the sessions will be issued from 23rd January 2023 onwards.
