School funding dilemmas for next government highlighted

A report by the Institute for Fiscal Studies, funded by the Nuffield Foundation, highlights the key issues for school funding for the next government.

It says that the number of pupils with the highest levels of assessed special educational needs has increased by over 60% since 2015, which has driven a £3.5 billion increase in the high-needs budget, which has used up nearly half of the £7.6 billion increase in school spending since 2015. 

Average teacher pay is 6% lower in real terms than in 2010, and about the same level in real terms as in 2001. This may help explain some of the recruitment and retention problems in the teacher labour market. 

Spending on school buildings is about 25% lower than in the mid 2000s and about 40% below what the government thinks is needed to ensure school buildings are in a good state of repair. 

Pupil numbers are expected to fall by more than 5% over the next parliament. This could create opportunities for savings, which may help offset the 2–3.5% cuts currently projected for unprotected areas of public service spending. However, realising savings would almost certainly require workforce reductions and/or school closures. 

The report says that between 2010 and 2019, total school spending in England rose by 1% in real terms. But since total pupil numbers grew by 11% over this period and school spending per pupil fell by 9%.

It also shows that since 2019, there has been a £6 billion (or 11%) real-terms increase in total spending. This has enabled spending per pupil to return to the same real-terms level as in 2010. 

It says that no growth in spending per pupil over 14 years is without precedent in recent history. The long-run average growth in spending per pupil is about 2% per year in real terms. Under Labour governments from 1997 to 2010, spending per pupil rose by an average of 5–6% per year in real terms. 

The report estimate that schools’ costs will grow by 4% in 2024 (compared with economy-wide inflation of 1%). This reflects increases in staff pay and rising food and energy costs. This could leave the purchasing power of school budgets about 4% lower than in 2010. 

A 5% fall in pupil numbers could create some opportunities for savings. If the incoming government maintained spending per pupil in real terms, this could generate savings of £3.5 billion by 2028. Such savings may be difficult to realise in practice. With the vast majority of school spending being on staff, savings can only really be delivered with workforce reductions and/or school closures. If total school spending was instead frozen in real terms for the next parliament, spending per pupil would be increasing at a rate of 1.5% per year, somewhat below the long-run average of 2% per year.

Luke Sibieta, IFS Research Fellow and author of the report, said: "Looking to the coming parliament, policymakers are caught between a rock and a hard place. On current plans, many other areas of public service spending appear to be facing cuts under either a Conservative or a Labour government. An incoming government might thus be tempted to cut school spending in response to falling pupil numbers. Realising such savings could be easier said than done as it would likely require workforce reductions and, perhaps, school closures. This is probably why policymakers have shied away from making cuts to total school spending in the past. There is also a growing list of pressures on school spending, which may become harder to address over time, such as the spiralling cost of special educational needs provision, real-terms cuts to teacher pay and a growing backlog of repairs to school buildings."