Birmingham’s education chiefs have made a stark warning – if many more schools turn into academies we will run out of cash.

Every time the change happens the city council is left out of pocket by paying the costs of the transfer, absorbing any debts owed by the school and through a reduced education budget.

In the last two years, the conversions have cost the city council more than £2 million – paid for by taxpayers.

Now, in an exclusive interview with the Birmingham Post, the city’s head of education has warned services face being drastically cut due to the spiralling costs.

Brigid Jones, cabinet member for children’s services, revealed the council is forced to write off debts as schools convert to academy status – despite some having six-figure budget deficits.

The council is required to meet the cost of deficits for academies which convert under a sponsor and for whom it has not been possible to agree a repayment plan in advance of the conversion date.

There have been four cases in the 2012/13 financial year, and the final figure is set to top £1.3 million.

Coun Jones said the authority has also run up a bill of more than £1 million in just two years – £300,000 in 2011/12 and £650,000 in the current tax year – on staff and admin costs to oversee academy conversions.

Around one in four of the city’s schools have now opted to move away from local authority control under the government’s academies programme. If that figure reaches 40 per cent the council runs out of cash for education services. This would mean any council services including administration, HR and legal support, would face the chop.

Coun Jones said the financial strain had already seen council funding withdrawn from schemes, including support for school governors and a reduction in funding for the school admissions and appeals services.

She warned that further funding could be cut unless the Government compensated the local authority for the cost of conversions.

She said: “If we are spending time and money on conversions, then we are not able to give the time and resources to the schools and pupils which are staying with us and are our responsibility.

“Our schools and children are getting a raw deal. If the Government is not going to reimburse us for these academy conversions, then we are going to have to stop doing other things.”

More than 70 Birmingham schools have become academies in the past two years – with nearly 50 in the current financial year alone. Among the latest crop of city schools to apply for conversion is Matthew Boulton Primary School in Handsworth.

A report put before a council cabinet meeting shows that the school, which is on course to become an academy on April 1, has a deficit of £253,000.

The primary school is being sponsored by the Oasis Community Learning Academy Trust, and Coun Jones said the school was looking into a repayment plan with the council.

She said: “We have had some high profile cases in Birmingham of schools with very large deficits.

“Now Matthew Boulton School has converted, leaving us with a just over quarter of a million pound deficit. This is a vast sum of money. We also keep a risk register of all of our schools, their deficit and their likelihood to convert. There is a potential for a large number of schools in the pipeline. The balance numbers do vary wildly – some are plus a million, some are minus nearly that. At the moment we can ask the Birmingham Schools Forum for sums of money to cover those deficits. We have a sum set aside for this year, but next year that sum decreases to only £1 million, and there is a strong chance our deficits will exceed that.”

Government guideline mean schools with a budget deficit can still convert to academy status, but those with a “significant” amount of debt must submit a deficit repayment plan.

This needs to be approved by their local authority, along with evidence repayments can be met. Coun Jones added more than £1 million has been spent by the authority on overseeing the academy conversions in two years.

Schools receive a £25,000 start-up grant from the Government to cover the cost of academy conversions, while local authorities do not receive a penny.

Speaking from the MIPIM property conference, Council leader Sir Albert Bore said: “As each school transfers to academy status a sum on money transfers from the central budget to the budget of that school and that figure is higher than we think we are spending in relation to that school.

“Once we have got 40 per cent of schools into academy status the pot which services schools will be exhausted.”

Chris Keates, general secretary of the Birmingham-based NASUWT teaching union said: “At a time of deep cuts to public services, including education, it is absolutely disgraceful that millions are being spent to wipe out the deficits built up by schools. Birmingham city council should be making a stand and refuse to pay these deficits.”

A Department for Education spokesperson said: “If a school chooses to convert to become an academy it retains any deficit or surplus it has. However, when a school closes or becomes a sponsored academy because of underperformance any deficit remains with the council.

“We have always been clear that local authorities need to be working with schools to prevent any deficits and surpluses becoming significant in the first place.

“When a school becomes a sponsored academy, it needs to be focused on securing rapid improvements and it’s unreasonable to expect a new school to start with inherited debt.”