Increases in school costs will outstrip the government’s recent funding boost, the Institute for Fiscal Studies has said, warning that leaders again face making more cuts to provision.
The schools budget is due to rise by about £2.3 billion next year (2025-26), but about £1 billion of this is for high needs.
That leaves a 2.8 per cent rise in per pupil funding for mainstream schools, IFS said, which is below the estimated 3.6 per cent rise in school costs. Most of the latter is driven by teacher pay rises, which were 5.5 per cent this year and 2.8 per cent for the next academic year.
The report states that school budgets will feel “very tight” next year, adding some may “struggle to cover their costs without making savings”.
Schools can only afford a 2 per cent pay rise next year, IFS said.
Julie McCulloch, policy director at the Association of School and College Leaders, said schools face “another round of cutbacks”.
“It will inevitably mean further reductions to pastoral support, curriculum options and classroom resources.”
‘Death by a thousand cuts’
She added: “Schools and colleges have been expected to absorb relentless financial pressures over the past 15 years… But we cannot go on like this. It is death by a thousand cuts.
“The government must recognise the importance of improved investment in education.”
The IFS’ annual education spending report sets out how, since 2019, school spending per pupil has risen by 11 per cent in real terms.
This finally takes back spending to 2010 levels after a decade funding squeeze.
Yet within that 11% growth, over half of the increase is due to the rapid growth in the number of pupils identified as having special educational needs.
After accounting for planned spending on high needs, mainstream school funding per pupil only grew by 5% in real terms since 2019, the IFS says.
This may explain why schools leaders “might have still felt a squeeze on mainstream school budgets despite large apparent growth in total funding per pupil”.
Paul Whiteman, general secretary at school leaders’ union NAHT, added: “We need to see real-terms growth in core funding, further investment in and reform of the broken special educational needs system, and a commitment to ensuring this year’s pay rise is above inflation and fully-funded amid a severe recruitment and retention crisis fuelled by years of real-terms cuts to salaries.”
SEND crisis wipes out potential falling roll savings
The IFS report will also provide a stark warning for government.
Luke Sibieta, IFS research fellow and report author, said the “challenging state of the public finances means that most departments, including schools and education, will need to make savings of 1-2 per cent per year”.
Pupil numbers are projected to fall by 2 per cent between 2025 and 2027, meaning government could save £1.2 billion by freezing spending per pupil.
However Sibieta said the projected rise of more than £2 billion on special education needs spending is “likely to wipe out any realistic opportunities for savings in the schools budget”.
Education spending is the second-largest element of public-service spending in the UK behind health, representing £116 billion in 2024–25, or about 4.1% of national income. It has fallen from about 5.6% of national income in 2010–11.
“The new government has high ambitions to improve education and reduce inequalities,” the report states. “However, like most governments in recent years, it faces a very challenging set of public finances, maybe even more challenging than the situation faced by past governments.”
Last year, the Labour government increased departmental spending plans, including education, for 2025–26. But they penciled in tighter spending plans for 2026–27 and 2027–28.
A Department for Education spokesperson said: “One of the missions of our plan for change is to give children the best start to life… We are determined to fix the foundations of the education system that we inherited and will work with schools and local authorities to ensure there is a fair education funding system that directs public money to where it is needed to help children achieve and thrive.”
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