22/11/2012 02:29 GMT | Updated 22/11/2012 02:31 GMT

Academies Programme £1bn Over Budget, Says National Audit Office

An extra £1 billion was spent by the Government in the last two years on turning schools into academies, the spending watchdog has said.

The National Audit Office (NAO) said the Department for Education (DfE) was "unprepared" for the financial impact of rapidly expanding the programme.

In a new report, the NAO said the department had initially failed to anticipate the scale of interest from schools who would want to take on academy status.

Academies are semi-independent state schools with freedom over areas such as the curriculum and staff pay and conditions.

The first academies were set up under the last Labour government.

Soon after the 2010 general election, Education Secretary Michael Gove announced he was opening up the programme to allow all schools in England to apply for academy status.

There are now around 2,309 open academies, compared with 203 in May 2010, and almost half of secondary-age children in England now attend one of these schools.

But a new NAO report concluded that while this expansion was a "significant achievement", the DfE was not ready for it.

It found that between April 2010 and March 2012, the DfE had to find an estimated £1 billion of additional costs.

To stay within its overall spending limits, and still allow the expansion to continue at the same pace, the DfE found this money from its main schools settlement and other budgets.

"The department was unprepared for the financial implications of rapid expansion," the report said.

It adds that the DfE was unable to recover around £350 million of the £1 billion from local councils to offset against academy funding.

The NAO said the Government relied mainly on academies' own financial management and governance to make sure that public money was used properly.

There have been only a few investigations into mismanagement at academies, it said.

But the report warned that financial mismanagement in any school was worrying, and incidences in academy schools could also put the reputation of the academies programme at risk.

The study also found that coping with the academy expansion put the DfE under "considerable resources and time pressure, particularly in the first 18 months".

Extra staff were hired and trained to work on the initiative, it said.

Since the expansion began, the number of staff working on the programme had risen from 120 in 2010/11 to 280 in 2011/12 - a rise of 133%.

NAO head Amyas Morse, said: "The academies programme is a key element of the Government's plans to reform the school system.

"Delivering a tenfold increase in the number of academies since May 2010 is therefore a significant achievement.

"However, the DfE was not sufficiently prepared for the financial implications of such a rapid expansion, or for the challenge of overseeing and monitoring such a large number of new academies.

"It is too early to conclude on academies' overall performance, and this is something I intend to return to in the future.

"As the programme continues to expand, the department must build on its efforts to reduce costs and tackle accountability concerns if it is to reduce the risks to value for money."

Margaret Hodge, chair of the public accounts select committee, said: "The rapid expansion and ongoing costs of the Government's Academy Programme over the last two years has left the Department for Education with an additional £1 billion bill.

"The decision to change fundamentally the nature of the programme away from one solely directed at struggling schools is up to the Government, but taxpayers have the right to expect a more considered and controlled approach to public spending than the department has so far displayed.

"The significant cost will have to be considered alongside the performance of academy schools when it comes to judging the overall success of the programme.

"The department was caught off guard by the number of schools applying to become academies.

"But what is more extraordinary is that the department failed to anticipate or plan properly for the impact on its own finances.

"The department has had to take money from other budgets to protect academies' funding and to help pay for costs such as insurance.

"It has even had to repay some £60 million to local authorities because central government got its own sums wrong."

Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers (ATL), said: "Today's NAO report shows only too clearly that the expansion of academies is being driven by political ideology and not by what's best for children's education.

"It is too early for anyone to know, Michael Gove included, whether academies will improve education, yet this government is driving an expansion regardless.

"There appears to be no limit to the amount of money this government is prepared to pour into creating academies, no check on how the funding is spent, and no attempt to take stock when some academies falter.

"The NAO reveals that 10 community schools which had been rated good or outstanding were rated inadequate within a year of opening as an academy."

Christine Blower, general secretary of the National Union of Teachers, said: "Michael Gove's priorities are entirely wrong.

"It is absurd for the Government to justify spending £8.3 billion on academy conversions in two years while at the same time warning of a dire economic situation.

"Meanwhile, many good state schools are told there's no money as they stand in a state of disrepair with ever-diminishing support services.

"Schools have suffered as the DfE has transferred funding from other budgets to stay within its spending limits.

"Furthermore, the NAO shows that some groups - academy super heads and insurance companies for example - are getting rich out of the academy programme at the public's expense."

A DfE spokesman said that the NAO was right to acknowledge the "extraordinary success" of the academies programme.

"We make no apology for the fact that more schools than even we imagined have opted to convert, and no apology for spending money on a programme that is proven to drive up standards and make long-term school improvements," he said.

"We want as many schools as possible to take advantage of the significant benefits that academy status brings - because it means more and more schools run by great heads and teachers, not local authority or Whitehall bureaucrats, and more and more children getting a first-class education.

"The DfE has made significant savings in the last two-and-a-half years and also set aside significant contingencies, which have been set against the growth in academies.

"Additionally, the costs of converting academies have already fallen by 53% per academy - and we anticipate that the further changes we are making will radically reduce the costs in 2013/14 and beyond."