New estimates by the Institute for Fiscal Studies (IFS) find that
growth in mainstream school funding per pupil in England in
2025–26 (2.8% in cash terms) won't be sufficient to cover the
expected increase in school costs (3.6%). Growth in school costs
reflects the full effects of the 5.5% rise in teacher pay from
September 2024, and the recommended pay offer of 2.8% for
September 2025.
While pupil numbers are expected to fall by around 2% over the
next two years, this is unlikely to allow for a cut in the
overall schools budget. Rapid rises in the cost of
special educational needs (SEN) provision seem likely to wipe out
any opportunities for savings, even if core per-pupil
funding is kept constant in real terms.
These are the main conclusions of the new ‘Annual report on
education spending in England: 2024–25' by researchers at the
IFS, published today, and funded by the Nuffield Foundation. All
figures are in 2024–25 prices and represent new IFS estimates of
spending per pupil across different stages of education in
England.
Also on schools
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Reversal of past cuts. Between 2019 and 2024,
total school spending in England grew by about £8 billion. This
led to 11% real-terms growth in school spending per pupil and
fully reverses cuts since 2010.
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Over half of the rise in school funding has been
absorbed by rising costs of SEN. After accounting for
planned spending on high needs (which is a statutory
requirement), we estimate that mainstream school funding per
pupil grew by 5% in real terms between 2019 and 2024, rather
than the 11% total increase.
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Potential savings from falling pupil numbers outweighed
by rising costs of SEN provision. With pupil numbers
expected to fall by 2% between 2025 and 2027, the government
could make annual savings of up to £1.2 billion by freezing
spending per pupil in real terms. However, the government also
projects high needs spending will grow by £2.3 billion between
now and 2027 without reforms. This makes finding savings in the
schools budget impossible without cutting mainstream per-pupil
spending in real terms.
Looking at other sectors
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Early years is set for the biggest ever increasing in
funding. From September 2025, all children in working
families will be entitled to up to 30 hours of funded childcare
a week from nine months old. As a result, spending on the free
entitlement will rise to £8.5 billion in 2026–27 from £4.2
billion in 2023–24 and £2.2 billion in 2010–11.
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Spending on colleges and sixth forms remains well below
2010 levels, and pressures are growing.Even with
recent funding increases, we estimate that college funding per
student aged 16–18 in 2025 will still be about 11% below 2010
levels, and about 23% lower for school sixth forms. About 37%
of colleges were operating deficits at the latest count
(2022–23). Average college teacher pay is expected to
be about 18% lower than pay for school teachers in
2025, contributing to the high exit rates amongst
college teachers (with 16% leaving their jobs each year).
Meanwhile the number of young people in colleges and
sixth forms is expected to grow by 5% or over 60,000 between
2024 and 2028. The government would need to increase
annual funding by £200 million in 2027–28 in today's prices to
maintain spending per student in real terms.
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Increasing tuition fees in line with inflation will
provide only slight reprieve for university finances
after more than a decade of cash-terms freezes. International
student numbers are likely to have fallen in 2024–25, and the
rise in employer national insurance contributions will increase
staff costs from April 2025. Unlike schools and colleges,
universities are not being compensated for this increase.
Meanwhile, in 2025 the poorest students will be
entitled to borrow 10% less in real terms than in 2020 to cover
their maintenance costs.
Luke Sibieta, IFS Research Fellow and author
said: ‘This year's spending review will bring a lot
of difficult choices on education funding in England. A very
tight picture on the public finances means that most departments,
including education, will probably need to make savings. Working
out exactly how and where is much easier said than done.
Spiralling costs of special educational needs provision seem
likely to wipe out any opportunities for savings in the schools
budget from falling pupil numbers. College and sixth form budgets
are already stretched, and will need to cover the cost of rising
student numbers. The inflation-linked rise in tuition fees only
provided a brief reprieve for university finances, and further
tuition fee rises seem likely.'
Josh Hillman, Director of Education at the Nuffield
Foundation said: ‘Amidst a tough fiscal climate and
competing priorities, the IFS's annual report delivers essential,
independent analysis of the winners and losers in education
spending. The analysis outlines the complex web of factors
influencing the government's decision-making on funding for the
early years, school pupils, and further and higher education
students. It highlights a range of challenges suggesting that the
spending squeeze for schools and colleges will continue, but some
gains for the under-5s.'
