School funding

Rising costs risk pledge to restore school funding to 2010 levels

IFS predicts school purchasing power will actually be 3% lower than in 2010 by next year

IFS predicts school purchasing power will actually be 3% lower than in 2010 by next year

The government will not meet its aim of bringing school funding back to 2010 levels because their costs are growing faster than those faced by the rest of the economy, new analysis suggests.

The Institute for Fiscal Studies found that once rising staff, energy and food costs faced by schools are taken into account, schools’ purchasing power will actually be 3 per cent lower in real terms in 2024 than it was when the Conservatives came to power.

Gillian Keegan, the education secretary, said last year the government’s current funding settlement “would allow schools to return to at least 2010 levels in real terms”.

IFS analysis did find “standard measures” of inflation typically used showed school spending per pupil “currently on course to be back above 2010 levels by 2024, with increases over this parliament more than enough to reverse the cuts seen up to 2019”.

But it found a “very different picture when we analyse the actual costs schools are likely to face, with school funding only increasing by just about enough to keep pace with school costs”.

IFS analysis found the rise in school funding amounted to a 13 per cent real-terms rise in spending per pupil between 2019 and 2025. This would be “sufficient to reverse past cuts and take school spending per pupil to 3 per cent more than its previous high-point in 2009–10”.

But the figures used to calculate these changes are based on inflation for the economy at large, rather than “actual costs faced by schools”.

Judged against these likely actual costs, “we see a much smaller real-terms rise in school spending per pupil over time”. This would be less than 6 per cent between 2019 and 2025. This would leave schools’ actual purchasing power 3 per cent lower than in 2009-10.

Teacher pay represents 54 per cent of schools’ costs and support staff pay represents 28 per cent.

Staff pay growth throws spanner in the works

The IFS’s analysis shows funding per-pupil grew “substantially faster” than total costs in 2020-21 and 2021-22. This enabled a real-terms growth in spending.

But this was “made possible by freezes in public sector pay in 2021, relatively low levels of overall inflation during the pandemic, and the fact that schools were fully compensated for increases in teacher pension costs in 2020–21”.

Luke Sibieta
Luke Sibieta

In 2022-23, the analysis found a “much faster” growth in school costs. Teacher pay increased by 5.4 per cent on average, while other staff pay rose by 8.5 per cent and non-staff costs went up 10 per cent, spurred by spikes in energy and food price costs.

The fast growth in costs has continued in 2023-24. A larger teacher pay rise, coupled with another rise in support staff costs has had an impact.

Teacher pay plans for next year are not confirmed, but based on the STRB’s original recommendations for this year, the IFS expects funding to grow by 4.3 per cent, while costs will increase by 3.7 per cent.

“Schools are currently seeing large cash-terms increases in funding, which look like large real-terms increases when using standard ways of tracking government spending,” said the IFS’s Luke Sibieta.

“However, schools are also currently facing rapid rises in costs, particularly support staff pay, energy and food costs, which are not captured in those standard economy measures.

“School funding per pupil is in fact increasing by only just about enough to keep pace with overall school costs. Policy debate should reflect the acute pressures on school budgets.”

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