Cabinet approved the financial risk categorisation for Merthyr Tydfil’s schools which include six in the high risk or red category

There are six schools which are currently categorised as “high” financial risk in Merthyr Tydfil.

Financial risk categorisations approved by the council’s cabinet on Wednesday, September 10, say that for 2025-26 six schools fall into the red category for financial risk, 12 into the amber category (medium to high risk), five into the yellow (low to medium risk) and one into the green (low risk).

The figures for 2024-25 show six in the red, 11 in the amber, three in the yellow, and four in the green.

The report said 75% of schools are at either high risk (red) or medium to high risk (amber), compared to 71% the previous year and 17% of schools have moved into a higher category of risk year on year with 58% remaining the same and 25% moving into a lower category of risk.

It says one of the red risk schools has plans to recover the deficit by the end of 2025-26, two have plans to recover their deficit over the period of the medium term financial plan (by 2028), whilst the other three schools are submitting plans during the first half of the autumn term.

The report says discussions are ongoing with these three schools to identify savings opportunities to ensure the deficit budget is stabilised during 2025-26 and recovery plans are addressed to return to a balanced budget. Stay informed on everything Merthyr Tydfil by signing up to our newsletter here

And it says further posts will be reduced across these schools in line with their recovery plans over the medium term financial plan to balance their budgets.

At the end of the 2024-25 financial year, schools’ balances held in reserves were £861,000 in surplus which was a better position than when school budgets were set in May 2024, but still represented a 58% reduction in balances year on year and a reduction to around 1.4% of delegated budgets held in reserve.

As part of the council’s budget setting process for 2025-26 the schools’ formula funding, which was grown in line with usual practice to include pay awards, other inflation increases and pupil number changes, had no further reductions applied for 2025-26 following a better-than-expected local government settlement.

But the reductions from 2023-24 and 2024-25 were still applied to each school’s funding for 2025-26, resulting in a reduction of 6.33% to each school.

During their budget-setting processes for the current financial year, schools have so far planned to reduce a total of 57 posts including 11 teaching, 44 learning support assistants and two others to support the balancing of their budgets.

The majority of these staff will be released from September 2025 and most of these posts were fixed-term contracts with less than two years’ service.

But nine of the posts have resulted in redundancy payments due to length of service although no compulsory redundancies have been necessary to date, the report says.

Other ways in which schools have chosen to manage their budgets include reductions in capitation spend, IT, agency cover, and reducing building maintenance costs.

Following this continued budget reduction in 2025/26 there are five schools setting a deficit budget in 2025-26 and requiring a planned licensed deficit.

School are currently working on plans to recover their deficit and the report says that given the position of falling balances across schools and an increasing number of deficit budgets, the aggregate schools balance at March 31, 2026 is projected to be -£889,000.

Councillor Gareth Lewis, cabinet member for education, said it is a challenging financial outlook for schools but that it is important to note that that is part of a broader trend across Wales which includes increasing deficits, staff cuts and reduced services.