Government faces tough decisions on education spending

The Institute for Fiscal Studies (IFS) has published its report on education spending in advance of the upcoming Spending Review.

The report says that if the DfE is treated as an ‘unprotected’ area, it could face a 3% real-terms cut to its budget over the next Spending Review period. Delivering such a cut – equivalent to £2.6 billion – would involve difficult trade-offs. Spreading the cut evenly would reduce school, college and adult education funding.

The report says that protecting schools and the 16–19 education budget in colleges would require a more than 20% cut across areas such as adult education, apprenticeships and higher education support. Protecting those areas as well would force cuts of up to 50% to other education spending, such as on universal infant free school meals or the physical education (PE) and sport premium, likely ending some programmes entirely.

The report says that falling pupil numbers in schools means that protecting the overall schools budget in England in real terms would allow for a 3% increase in per-pupil funding between 2025–26 and 2028–29. Protecting per-pupil funding instead would allow for a £2 billion or 3% cut to school spending, exactly in line with the potential 3% cut in ‘unprotected’ public service spending over the same period.

Since 2019–20, total school funding has grown by about £9 billion or 16% in real terms. However, about half of this has been taken up by the growing costs of special educational needs provision. Schools have faced rising employer costs, rising energy costs and increasing salary costs. Excluding high-needs funding, mainstream school funding per pupil grew by 37% between 2019–20 and 2025–26. This compares with 38% growth in the costs faced by schools over the same period.

The report says that schools face a particularly tight set of pressures in 2025–26. Mainstream school funding per pupil is expected to grow by 5.8% in cash terms (including £800 million in compensation for increases in employer national insurance and £615 million to partially cover the costs of 2025 pay settlements). However, school costs are expected to grow by 6.5%, including pay offers of 4% for teachers and 3.2% for support staff. Schools would need to make efficiency savings of £300–400 million to afford these pay rises from existing budgets.

Spending on pupils with special educational needs is forecast to rise by over £2 billion between 2025–26 and 2027–28, driven by projected growth in entitlements. This will make it harder for schools to deliver any savings over the next few years.

In contrast to schools, rising student numbers in further education and sixth forms mean that maintaining per-student funding would require an additional £290 million. Protecting the total 16–19 budget would result in a 3% decline in funding per student.