DfE recommends ‘affordable’ 3% teacher pay rise for 2023

A pay rise of 3 per cent for most teachers from September will be “affordable” and keep salaries “competitive”, the government has said.

However, in its evidence to the school teachers’ review body (STRB) published today, the Department for Education admitted there could be “more headroom” for a greater rise if energy costs fall.

While the STRB is independent, the government sets the parameters in which it has to operate.

This year’s remit letter said its recommendations should “strike a careful balance, recognising the vital importance of teachers and other public sector workers, whilst […] not increasing the country’s debt further, and being careful not to drive prices even higher in the future”.

The STRB recommended a 3 per cent pay rise for most teachers and leaders from September 2023 in its report last year, having been asked to make recommendations for two years in a row.

But the government only implemented its recommendation for 2022-23, which worked out as 5 per cent for most teachers and an 8.9 per cent rise in starting salaries.

That pay settlement has become the subject of an official pay dispute with the National Education Union, NASUWT teaching union and NAHT school leaders’ union, and led to walkouts of teachers across England earlier this month.

‘Changing conditions’ might allow bigger rise

Today’s evidence relates to the pay rise for next academic year.

The DfE said its proposal for a 3 per cent rise for most teachers and leaders, and increase in starting salaries to £30,000 amounted to a 3.5 per cent increase overall.

But official inflation predictions suggest the DfE’s proposal will amount to another real-terms cut in pay.

Annual inflation hit its highest level in decades in October, and remained in double digits since.

Average prices for goods and services are expected to remain above the government’s 3.5 per cent pay recommendation throughout 2023, according to the Office for Budget Responsibility.

The DfE said such a rise would be “manageable” within school budgets in 2023-24.

It would also “maintain competitiveness within the wider labour market, noting however the possibility that changing conditions might allow schools to accommodate a higher award”.

Schools “may wish to think about how their budgets would accommodate such an award, though an improvement to energy prices would also help accommodate this”.

According to the DfE, each 1 per cent increase in staff pay costs schools collectively around £270 million a year.

Schools have £2.1bn ‘headroom’, claims DfE

In its latest predicted schools’ costs document, also published today, the DfE said it anticipates schools’ spending nationally “could rise by a further £2.1 billion in 2023-24 before they would face a net pressure on their budgets”.

“For clarity, all expenditure on pay awards, and on increased energy costs, would therefore need to be covered within this £2.1 billion ‘headroom’, to avoid schools facing an overall funding pressure nationally.”

Energy costs, however, still present an unknown. The DfE said these would cost the sector an extra £600 million for every 100 per cent increase in bills.

In meetings with stakeholders, “cost increases of between 100 per cent to 300 per cent to previous contract rates have been cited in 2022-23 alone”, the DfE said.

“Different energy scenarios mean that more headroom could be available than the 3.5 per cent currently estimated,” DfE added. “This could allow for additional investment in areas which benefit pupils, including, for example, a higher pay award.”

Rising costs eat up most of this year’s funding

The DfE’s school costs document states that funding for mainstream schools rose by 6.8 per cent this year, but that average costs rose by 6.1 per cent.

This meant schools could on average increase spending by 0.7 per cent, or £300 million across the sector.

In 2023-24, core funding is expected to increase by 6.7 per cent, while known costs will go up by 2.1 per cent.

However, this “excludes pay awards and energy price rises beyond the GDP deflator (standard measure of price inflation in the public sector)”. 

This led the DfE to its conclusion that schools could raise expenditure by £2.1 billion (a 4.6 per cent increase).