School and trust leaders should be under no illusion. The upcoming spending review is likely to involve cuts to total school spending. They should be planning accordingly.
While there were no direct policy decisions on schools, the spring statement confirmed an extremely tight fiscal situation. A natural assumption is that spending per pupil will be frozen in real-terms, with spending falling as the number of pupils drops.
In last year’s autumn budget, the government provided an extra £2.3 billion in school funding. This allowed for a 1.5 per cent real-terms increase in funding per pupil, taking it back to just above its 2010 level.
In the spring statement, the chancellor set out plans for a 1.2 per cent per year real-terms increase in day-to-day spending on public services between 2025-26 and 2028-29, the three years covered by the upcoming spending review. This is only very slightly down from 1.3 per cent per year set out in the autumn budget.
After accounting for commitments on the early years, defence and likely settlements for the NHS, this is likely to translate into 1 per cent real-terms cuts per year in all other areas of public services, which includes education.
These plans could be topped up, but the scope for doing so is extremely limited. Markets are likely to be wary of further borrowing. The politics of further tax rises and welfare cuts are dicey.
Higher economic growth and a sudden reduction in geopolitical tensions could make matters easier – but I’m not sure I’d be banking on that.
So what would cuts to education spending look like?
The schools budget is currently about £65 billion. The government could make savings of about £1.8 billion by freezing school spending per pupil in real terms, and allowing total spending to fall in line with the 3 per cent expected drop in pupil numbers.
Growth and geopolitics could make matters easier – but I’m not sure I’d be banking on that
Given that 83 per cent of school spending is on staffing, actually making those savings would likely require a drop in staff numbers, and/or pay awards at or below the level of inflation.
College and sixth form funding totals about £9 billion. However, making cuts to this funding is likely to be very hard because student numbers are expected to rise over the next few years.
To avoid making cut to school or college funding, the government would need to make deep cuts to the remaining £13 billion of spending. This covers apprenticeships, adult education, universal free school meals, teacher bursaries, the PE and sports premium, HE student support and other smaller programmes.
Given the fiscal situation, avoiding cuts to education spending would just mean bigger cuts to other areas of public spending. This includes many areas of public spending that affect schools in meaningful ways, such as welfare, children’s services, housing and health.
Within schools, there are some particular pressures and challenges. It seems highly unlikely that schools will be able to afford above-inflation pay rises for teachers.
The government has already concluded that schools would need to find ‘efficiency savings’ in order to afford its proposed pay award of 2.8 per cent for September 2025. A higher pay rise would need to be funded by cuts to other areas of education spending or bigger efficiency savings.
This leads to high interest in innovation. Employer pension contributions for teachers are about 29 per cent, which compares with about 6 per cent in the private sector. As a result, the share of remuneration in the form of pension promise is higher for teachers than the vast majority of other occupations.
United Learning Trust, one of the largest academy chains, has proposed offering teachers reduced pension promises in return for higher take-home-pay. This is fully in line with evidence showing that high remuneration in the form of pension promises is ineffective for improving recruitment and retention.
The business case for this innovative trial is self-evident and the department should be actively encouraging more schools and trusts to experiment in this way.
Last, but not least, there is the issue of special educational needs and disability (SEND) funding. The picture of rapid rises in numbers, exploding costs, legal fights and unsustainable deficits will be familiar to readers.
The government currently forecasts that spending on SEND will rise by £2 to £3 billion by 2028 without reforms to the system. This would need to be found within an extremely tight schools budget or from deeper cuts elsewhere.
A white paper for SEND reform is planned for later this year. Any significant reforms are likely to require extra spending in the transition. However, any credible plan will need to be crystal-clear on how it will save money or slow the growth in spending in the long-run.
In the meantime, it’s also crystal-clear that schools should be expecting spending cuts from 2025 onwards.
