Before Wednesday’s budget, schools had been making financial plans mostly in the dark for 2025-26 and beyond.
That is because there were no departmental spending plans, and consequently no confirmed national funding formula allocations.
The government has now confirmed plans for 2025-26, but future years won’t be determined until spring 2025.
The overall picture for school spending
The government has allocated an extra £2.3 billion in core school funding for 2025-26.
This represents a 1.4 per cent real-terms increase in total spending, or 1.6 per cent in spending per pupil, as total pupil numbers are forecast to fall very slightly next year.
The growth in core school spending will take spending per pupil, after adjusting for inflation, to around £8,100 – just above its high-point of £8,000 in 2010.
This is a meaningful increase.
Looking at the change in funding between last year and next, education is solidly in the middle of the public services pack.
It has received less generous increases than local government grants or justice, but bigger funding growth than defence and transport, and similar to health.
Pressures on budgets
But – as is the case in many public services – even substantial funding increases are quickly accounted-for by rising costs and pressures.
As part of the £2.3 billion rise, the government promised a £1 billion rise in funding for special education needs and alternative provision.
This represents a 6 per cent real-terms rise in funding for high needs.
But this is more an acknowledgement of reality than a decisive step change in allocations.
The number of pupils with education, health and care plans has risen by more than 7 per cent per year since 2015. Spending on high needs accounted for nearly half of the £7.6 billion increase in school funding between 2015 and 2024.
The government has further assumed that most of the £1 billion rise for 2025 will probably end up plugging ongoing deficits in high-needs budgets.
Funding must help cover pay rises
A chunk of the £2.3 billion will be needed to cover the costs of the 5.5 per cent teacher pay award from September 2024.
The government allocated about £1.1 billion in July for seven months’ worth of costs in the 2024-25 financial year. With a full 12 months of higher teacher pay to fund in 2025-26, around £450 million is needed to cover the full costs.
After accounting for high needs and the teacher pay offer, this leaves about £800 to $900 million of the £2.3-billion increase to cover other school costs, pressures and pay rises for 2025-26.
To get a sense of scale, that amount would imply an increase in the schools block of around 2 per cent.
This would in turn imply increases in most national funding formula rates of 2 per cent and potential for staff pay rises of a similar magnitude in 2025.
This is the same or lower than the increases in national funding formula rates seen between 2019 and 2024.
The government has also committed to providing further funding to cover the costs of higher employer national insurance contributions. It just hasn’t said how much or exactly when this will be confirmed.
Where next for school funding?
Looking to the future, do we have any sense in what school funding might look like in coming years?
The answer is not much, in both senses of the phrase.
The government has allowed for a 3 per cent real-terms increase in day-to-day spending on public services in 2025-26.
For 2026-27 and 2027-28, the chancellor has penciled in real-terms increases of 1 per per year in day-to-day spending on public services.
With so many pressures on public service spending, it would seem prudent to expect a tight schools settlement if these plans stay the same.
This could put further pressure on school budgets if there are continued problems in the teacher labour market and costs of special educational needs provision continue to escalate.
On the latter issue, the government has made reform of the SEND system a major priority. The questions are how, and with what money?
Capital for (re)construction
The chancellor also announced increases in spending on school buildings.
The overall education capital budget will be £6.7 billion in 2025-26, which represents a real-terms increase of about 2 per cent per year between 2023-24 and 2025-26.
This is the same planned rate of growth as set out by the last government in the 2021 spending review for 2021-22 to 2024-25.
Within this budget, the government has committed to an extra £300 million in maintenance spending, which takes it up to £2.1 billion in 2025. However, this is still below the real-terms levels seen between 2020 and 2022.
School leaders will have undoubtedly welcomed the £2.3 billion rise in core funding in the budget.
However, they will be all too familiar with the pattern of these increases being mostly taken up by the rising costs of high-needs provision and other costs, with little left over afterwards.
In this sense, the future doesn’t look that much different from the recent past.
Luke Sibieta is a research fellow at the Institute for Fiscal Studies.
