School spending power to stay below 2010 levels as inflation drives up costs

Schools in England face a period of financial “stagnation” unless the new prime minister orders a new cash injection, a new report has warned.

The report by the economic think tank Institute for Fiscal Studies found that the government is on track to miss its target of restoring spending per pupil to 2010 levels in real terms by the 2024/25 financial year.

Instead, school spending will remain 3 per cent below the level inherited by the incoming Conservative-led administration in 2010, once the rising costs faced by schools are taken into account, with “challenging” years of real-terms cuts to follow.

The warning comes at a time when the new PM faces the threat of strike action by teachers over a 5 per cent pay rise, an increase that lags well behind inflation at 9.4 per cent – and is forecast to top 11 per cent by the end of 2022.

With teachers’ pay making up the majority of school budgets, unexpected upward pressure on costs has knocked the government off track for the 2024/25 target set in the 2021 spending review, said the IFS.

After falling to 9 per cent below 2010 levels in 2019/20 in real terms, after a decade of austerity, funding for schools has been rising in recent years.

But rocketing inflation in the wake of the Covid pandemic has hit hopes of returning to earlier levels.

IFS research suggests that the actual costs faced by schools are growing faster than inflation in the economy at large.

While overall growth of 7.7 per cent in spending per pupil will outstrip an expected 6 per cent increase in school costs in 2022/23, headteachers will face a cut in funding the following year, with costs rising at 4 per cent and per-pupil spending at just 3 per cent.

In 2024/25, schools face “stagnation” in funding, with growth in spending per pupil only just above projected cost growth.

Specialist schools will be forced to tighten their belts the most because they need to employ more support staff than mainstream equivalents.

IFS research fellow Luke Sibieta, the author of the study, said: “On top of rising energy and food prices, schools now also face the cost of rising salaries for teachers and support staff.

“Within the context of a £4bn rise in the school budget this year, these costs look just about affordable – at least on average.

“Next year looks much more problematic, however, with growth in funding per pupil expected to fall below growth in school costs. Indeed, the fast rises in school costs will reduce school budgets’ purchasing power and leave spending per pupil in 2024 still about 3 per cent lower in real terms than in 2010.

“The big fiscal choice for policymakers this autumn is whether or not to provide more funding to public services to compensate for rising costs and the significant challenges they face. It will be that much harder for schools to meaningfully contribute to levelling-up ambitions when they face real-terms cuts from next year onwards”

The joint general secretary of the NEU teaching union, Mary Bousted, said: “School funding has stagnated for too long, letting down generations of young people.

“It allows buildings to fall into disrepair, the loss of vital staff and the side-lining or removal of whole subjects.

“These privations long predate Covid and the cost-of-living crisis. The funding pressures on schools have been immense under successive Conservative governments, and this will continue without a drastic change of mindset.”

Dr Bousted said that the teachers’ pay award for 2022/23 amounts to an “unacceptable” cut of nearly 7 per cent once inflation is taken into account.

“There is no commitment to fully fund even this inadequate increase,” she said. “We remain willing to negotiate this further with government but should there be no change the NEU will look towards consulting its members in the autumn. This will be the largest ballot of teachers for a generation.

“It is in the interests of the whole school community, that a major funding and pay increase that reflects the huge loss to teacher and support staff salaries is announced by the next Conservative leader – one that will benefit all schools, all staff and all pupils.”

The general secretary of the NASUWT teaching union, Patrick Roach, said: "The government has since 2010 systematically reduced real-terms funding for schools and wider services for children and families.

"Pupils, teachers and schools are being asked to pay the price for years of government under-funding.

"Unless the next prime minister is willing to commit to delivering a substantially better deal which significantly improves the funding of schools in real terms, they cannot claim to be putting education first whilst children’s education continues to suffer."

A Department for Education spokesperson said: “We recognise that schools - much like the wider economy - are facing increased costs due to the unprecedented recent rise inflation.

“To support schools, budgets will rise by £7bn by 202/25, compared with 2021/22, with the total core school budget increasing to £56.8bn.

“In the current financial year alone, core school funding is rising by £4bn compared to the previous financial year, a 7 per cent cash terms per-pupil increase, which as the IFS concludes will mean that any increased costs are broadly affordable for schools in 2022/23.”