‘Ring-fenced’ schools budget at risk in next round of £11bn cuts

The schools budget is under threat as the Treasury seeks another £11.5bn of cuts despite David Cameron’s previous promises to protect the funding.

Michael Gove, the Education Secretary, whose spending on schools has been ring-fenced in previous Whitehall budget negotiations, is urging Mr Cameron to confirm that the guarantee extends to the 2015-16 financial year.

But George Osborne, the Chancellor, and some Liberal Democrat ministers are prepared to look again at the schools budget as talks get underway on what insiders admit will be a “very difficult” Cabinet battle before a government-wide review is published on June 26.

The row comes after The Independent revealed last week that ministers are to effectively abandon their pledge to ring-fence NHS spending by diverting more than £1bn to cover the spiralling cost of social care. One Cabinet source said: “Everyone knows the NHS is under enormous pressure. But the pressure on the schools budget is not quite of the same order.”

Ministers say many schools have money in their reserve funds and have been helped by the Coalition’s “pupil premium” for children from poor families, on which spending will rise to £2.5bn a year by the 2015 election.

Mr Gove, whose total budget is more than £50bn, is already facing a Treasury demand for cuts of about £2.5bn in 2015-16 in non-schools spending, which is not ring-fenced. That includes “early years” provision such as children’s centres, which have already been squeezed.

On Monday, Mr Cameron did not mention schools when he defended the ring-fencing of the NHS budget.

Today Cameron aides played down this omission as a slip of the tongue, insisting he is sticking to his previous promises on ring-fencing. These covered health, overseas aid, defence equipment and schools.

However, Whitehall sources said there could be scope in the review to reclassify some spending in order to relieve the pressure on non-protected areas.

Philip Hammond, the Defence Secretary, wants the Department of Health to pay for health care for service personnel and Mr Gove’s department to fund the education of their children.

Vince Cable, the Business Secretary, wants Health to fund the Medical Research Council, which comes under his department. But these moves, if accepted by Mr Osborne, would leave less money for other health spending.

Mr Cable is arguing that ring-fencing means parts of Whitehall that have already suffered the biggest cuts now face another squeeze in 2015-16. Today Nick Clegg defended the previous decision to safeguard health, schools and foreign aid.

He told BBC Radio 4: “It was a big decision, a controversial decision, but I think it was the right one to take and the right one to stick to.”

Ed Miliband admitted that Labour’s plan for a temporary cut in VAT would mean a short-term rise in borrowing, a day after declining to confirm that in a bad-tempered radio interview.

Today he told ITV’s Daybreak programme: “I am clear about this – a temporary cut in VAT, as we are proposing, would lead to a temporary rise in borrowing. The point I was making was to get growth going by cutting VAT, then over time you will see borrowing actually fall.”

The Independent revealed this month that Labour is preparing to fight the 2015 election on a plan to spend more than the Coalition.