Nobody likes a spending review. Even if you think you like that kind of thing, you wouldn’t like a spending review.
It seems a great opportunity to think longer term, work out what the priorities are (and therefore the strategy), and then to allocate resources to deliver on the strategy. But it soon becomes clear that rational prioritisation is all but impossible.
This time, I understand the department for education (DfE) made some sensible proposals about what could be cut to free up resources for the priorities – like free school meals for infants from affluent families who can afford food perfectly well – but were condemned by the treasury (HMT) for making obviously absurd suggestions.
The practical reality of the process is that large numbers of people carry out increasingly nugatory financial work to increasingly ridiculous deadlines as HMT grinds smaller and smaller in pursuit of a surface rationale for decisions which will ultimately be made for entirely political reasons.
And then HMT spins the conclusions in such a misleading way that it can take weeks before the implications become clear.
The language of priorities
Aneurin Bevan famously said ‘the language of priorities is the religion of socialism’. But the reality of today is that prioritisation is hard for politicians of all political persuasions. Prioritising one thing means de-prioritising others.
When there is little to no economic growth, de-prioritising something means cutting it. And as the average growth rate of GDP per head in the UK since 2007 – practically a whole generation – is about 0.35 per cent per year, that’s where we are.
Running something well, especially when facing big challenges, means prioritising well. But the reality is that the political judgments made in spending reviews are typically designed more to avoid political rows than to achieve necessary goals.
It isn’t, of course, the current government’s fault that they inherited a terrible national debt position, crumbling public services and a sharply deteriorating international security position. It’s mostly not their fault that we spend £105 billion (more than the entire education budget) on debt interest each year.
They probably weren’t wrong to believe that they might not be elected if they said they’d raise taxes further. And that to be seen as credible, they had to promise not to increase debt by more than the previous government said they would.
We already knew the consequence of that: a very tight spending review, in which total departmental spending will rise by only 1.2 per cent per year in real terms.
They’re probably also not wrong to think that the public’s biggest concern is the health service and that there is a limit to the amount of pressure they could put on the NHS to live within its means without a big row.
So the NHS gets an average real-terms increase of 3 per cent per year. And as health now spends about 40 per cent of all departmental expenditure, that’s pretty much all the money gone.
Maybe the fact that education will – for the first time in a spending review – get less growth than the average across all spending departments makes political sense.
Schools budgets will grow by less than 2.4 per cent per year in cash terms. Government expects that to be a 0.4-per cent growth in real terms, though that requires inflation to come down and stay down.
That’s less than health and defence, as we knew it would be, but also less than local government, the intelligence services, justice, science and technology, transport, energy, the law officers, Wales, Scotland and Northern Ireland.
It’s less than the increase in the very-angry-about-funding police service’s spending power.
It’s even less than the rest of education.
Funding in real terms
The last time we had such a poor three-year cash settlement was the period 2014-2018, when average cash increases were about 1.8 per cent. But then, inflation averaged 1.5 per cent and the consequence was that we had 1-per cent pay awards each year.
Maybe the government is making a sound choice. But it slightly sticks in the throat that HMT are trying to present it as good news, and that their spin is being widely reported.
The claim that this is a ‘£2 billion increase in real terms’ is a version of spin I can’t remember seeing before. It relies on treating the financial year before last (pre-election) as the first year of the current spending review period.
The truth is that it’s a £730 million real-terms increase from the current financial year to the last one of the spending review. Of this, £410 million is for the extension of free school meals.
That leaves a theoretical real-terms increase of £320 million for running schools. But that is fully absorbed by the full-year effect of the £615 million we recently received for the higher-than-expected teachers’ pay award (only seven months of which falls within the 2025-26 baseline).
So to all intents and purposes, this is a flat real-terms settlement for three years.
If, as Schools Week are reporting, the £760 million ‘SEND transformation fund’ is coming out of the core schools budget, then that represents a significant real terms funding cut in school funding.
This year, a core schools budget cash increase of 5.2 per cent has translated into a 0.5-per cent per-pupil cash increase in actual school funding because of the hugely increasing costs of the high needs block.
A cash increase to the core school budget of 2.4 per cent would mean substantial cash decreases in actual school funding if the high needs block is allowed to continue on its current path.
If this more-than-tight settlement is government’s political choice, the question is whether they are now prepared to take the tough decisions that flow from it.
Because they’ve inherited just one broadly well-functioning major public service: schools. I don’t see how they win the next election if that goes south or the public perceives an ongoing funding crisis.
Three tests for ministers
Their promised white paper on SEND reform is the first test.
Will they acknowledge that very large amounts of money are being wasted in ways that do not benefit children’s education?
Will they be prepared to take on some of the sector’s most powerful lobbies in order to put the money in school budgets, when that will be presented as ‘taking money from vulnerable children’?
HMT’s inability to stick to its guns on winter fuel benefit – even for pensioners whose income is average for the working population – does not bode well.
The next challenge will be pay.
The spending review is clear: ‘Pay awards will need to be funded within the departmental settlements set out’.
So will government be able to hold pay demands to affordable levels in the face of union demands for above-inflation rises and the STRB’s apparent willingness to disregard the government’s position on affordability?
Ironically, on the same day as the spending review, the government published a consultation on the school support staff negotiating body (SSSNB). It opens with a ministerial foreword strongly implying that its point is to pay support staff significantly more, something we can now be sure is unaffordable.
After that, they’re going to have to support and stiffen the sinews of local authorities, trusts and others to make the right moves in response to falling rolls. You only get the financial benefit – and therefore the benefit to children – if you’re willing to make tough and locally unpopular decisions like closing schools if necessary.
Nobody likes a spending review. But if you’re not prepared to make the big choices then, and you spread the money out to avoid rows, you’re going to have to make some big calls later.
The time for them is coming. If we’re going to avoid a financial crisis in schools, it had better come fast.
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