The education secretary has committed to fully funding this year’s teacher pay rise following lobbying by the National Education Union, the union has claimed. The government confirmed in July that teacher pay would increase by 3.5 per cent from this month. Despite the NEU threatening to strike if the pay award was not fully funded, schools were expected to help stump up a significant part of this cost. The NEU previously estimated schools would have to find about £460 million from their budgets. About half the 2026-27 pay increase (1.7 per cent) was to come from additional government funding, while schools were expected to provide about 1.8 per cent of the award. But in a letter to NEU general secretary Daniel Kebede, seen by Schools Week, education secretary Lucy Powell today confirmed schools can use savings from lower pension contributions to fund pay rises. The government has stressed the pay award remains the same as before, but that the change makes the pay rise more affordable for schools. The NEU said it amounts to “a fully funded pay increase for all teachers throughout England”, hailing it as “a significant step”. Pension savings not clawed back In her letter to Kebede, Powell wrote: “I understand you are concerned the funding available in 26-27 is insufficient to cover the costs of the recent pay award. “I am therefore pleased to be able to update you that recent revaluations to the Local Government Pension Scheme will see a 4.9ppt reduction in employer contribution rates and deliver significant savings on schools’ pay bill for support staff. “We can confirm this reduction in costs will not be clawed back, and as such, we are confident that schools will be able to cover the costs of the teacher pay award, at a national level.” A spokesperson for the secretary of state said Powell “has been clear from day one that supporting teacher recruitment, retention and wellbeing, and rebuilding the relationship with the profession, are among her top priorities”. “High-quality teaching is the single most important in-school factor in improving outcomes for children, which is why this government has backed the profession with a pay award that recognises teachers’ vital role,” they said. “Teachers will play a leading role in delivering this government’s education reforms. That’s why following recent changes to Local Government Pension Scheme employer contributions, we are confident schools can now meet the costs of the award at a national level.” ‘A message of hope’ Welcoming the news, Kebede said: “Finally, we have a government that accepts the reality that any teacher pay award must be fully funded. “Plugging the £460 million black hole in school budgets signals a welcome return to reality, and a message of hope for the entire school community.” He hailed the “significant ground conceded by government” as “a consequence of NEU members’ willingness to take a stand”. “Schools have been running on empty for far too long. “Leaders simply could not afford to fund the pay award as set out by the previous education secretary. The new administration has accepted that it is wrong to force schools to make cuts to education just to make ends meet.” “We hope to work with this government to ensure that education is truly valued in this country. We hope today marks an important turning point, and one we as a union will aim to build from. We must make austerity in the classroom a thing of the past.” The NEU was due to hold a formal strike ballot which would open in just two-and-a-half weeks. Kebede said in light of today’s news, “the NEU Executive will discuss our response on 24 September.” Announcing the 3.5 per cent rise in July, the government said the first 1 per cent was expected to come from schools “maximising value” – finding savings – in existing budgets. A further 0.8 per cent from “funding in schools’ existing budgets…as per [the DfE’s] affordability assessment” in its school costs technical note (SCTN). Detail important School leaders’ union the National Association of Head Teachers (NAHT) also welcomed news of the funding change. General secretary Paul Whiteman said: “We wrote to the previous chancellor about this in May of this year and we are pleased that the new administration has heard and understood our demands. “We will need to look carefully at the detail to determine whether this means the pay uplift is genuinely fully funded at an individual school level, but it certainly puts schools in a better position than they would otherwise have been.” This is a breaking news story. More to follow.