IFS: Rapid rises in SEND and childcare spending are reshaping education spending in England

Spending on special educational needs and disabilities (SEND) is expected to more than double in real terms between 2015 and 2028. Rapid rises in spending on SEND to date have been largely accommodated by squeezing funding for mainstream schools. Overall, school spending per pupil rose by 10% in real terms between 2019 and 2025. However, new IFS analysis shows that mainstream school spending per pupil increased by only 5% over this period – far less than originally intended.

At the same time, recent governments have significantly increased entitlements to free childcare. The state now spends nearly £9 billion on these childcare entitlements, double the amount from two years ago and more than eight times as much as in the early 2000s.They have also channelled funding away from disadvantaged children and towards working families, who now receive 58% of total funding, up from 15% in 2014.

In other areas, public spending on education has become less generous since 2010. Recent increases in funding for further education only partially offset previous cuts. Recent changes to student loan terms will increase lifetime repayments for students who started between 2012 and 2022. For the 2022 cohort, the changes mean that the taxpayer will bear almost none of the long-run cost of financing their higher education.

These are among the conclusions of the new ‘Annual report on education spending in England: 2025–26' by researchers at the IFS, published today, and funded by the Nuffield Foundation. All figures are in 2025–26 prices and represent new IFS estimates of spending per pupil across different stages of education in England.

Other findings on school years funding include:

• In 2025, total school spending per pupil (aged 5-18) was about the same level in real terms as in 2010. Spending per pupil fell by 10% in real terms between 2010 and 2019, but has since recovered due to a boost in school funding since 2019.
• OBR forecasts show a £6-billion gap between expected funding and spending on SEND in 2028. To set this in context, that shortfall is equivalent to 9% of the anticipated total schools budget in that year. The government has three options for addressing this pressure: reforms to slow the growth in spending; topping up the overall education budget; and/or making cuts elsewhere in the education budget.
• The government has committed to freeze the overall schools budget in real terms between 2025 and 2028. Falling pupil numbers means the government could release about £1.8 billion in 2028 by freezing mainstream school spending per pupil for these 3 years. This could help to partially meet spending pressures on SEND.  
• Delivering a real-terms freeze in mainstream school spending per pupil would be challenging for schools. We project that the actual costs faced by schools could increase by between 0.5 and 1 percentage points faster than general inflation between 2025 and 2028.

Rising early years funding represents a major extension of the state

• Take-up of the new childcare entitlements for working families with children under 3 in 2024 was a quarter higher than initially expected. This has put pressure on budgets, which was only partly offset at June's Spending Review. If the new entitlements continue to be as popular as they are now, the government is on track for perhaps £350 million (in today's prices) in extra spending in 2028.
• New entitlements have also reshaped how early years spending is targeted. The share of spending targeted specifically at working families has risen from 15% in 2014 to 48% in 2024, and is on track to reach 58% in 2025. By contrast, total spending on disadvantaged children halved in the decade to 2024, as tighter eligibility criteria saw entitlement to the 2-year-old disadvantaged offer fall from almost 40% of 2-year-olds to under a quarter.
• Increases in the minimum wage and employer National Insurance contributions have pushed up childcare providers' costs much more quickly than economy-wide inflation. Once these rising costs are accounted for, resources per hour for 3- and 4-year-olds are 22% lower than at their peak in 2017, and they have fallen by 4% just in the last year.

Increases in further education and sixth form spending are gradually reversing past cuts

• In 2025, funding per student aged 16-18 in colleges was around 8% lower in real terms than in 2010; for students in in school sixth forms, it was around 20% lower. Although funding has risen since 2019, this has only partially reversed earlier cuts.
• In the recent post-16 white paper, the government set out plans for a £450 million real-terms increase in funding for 2026. This would translate into a 2.5% increase in real-terms funding per student.
• Maintaining spending per student at its 2026 level in real terms would require total 16–18 funding to increase by almost £150 million (in today's prices) by 2028. Extra money is required as the number of students is projected to increase by around 70,000 (3%) between 2025 and 2028.
• Total spending on adult skills and apprenticeships has increased by 8% in real terms between 2019 and 2025. However, this only reverses a fraction of past cuts: total spending in 2025–26 will still be 25% below 2010–11 levels.

Some stability in higher education funding, with higher student loan repayments for many graduates

• In higher education, up-front teaching spending per student in 2025 was around 5% lower in real terms than in 2010, and around 22% lower in real terms than its high point in 2012 (when tuition fees were increased). This is due to successive cash-terms freezes to the cap on tuition fees.
• The government has committed to increase the tuition fee cap with inflation from now on. This will arrest the decline in real-terms per-student teaching resources and will provide some much-needed certainty for universities and prospective students alike.
• In the 2025 Budget, the government announced that the loan repayment threshold for students who started their courses between 2012 and 2022 will be frozen in cash terms between 2026 and 2029. The thresholds that determine how much interest is added to these loans will also be frozen for the same period – though this was not explicitly announced anywhere in the Budget speech or Treasury documents. As a result of both freezes, those who started courses in 2022 can expect to repay around £3,200 (6%) more on average over their lifetime.

Luke Sibieta, IFS Research Fellow and author said: 

‘The most important education issue facing the government is the growing dysfunction in the special educational needs system. The problems here are not new, but they have been growing, and the government is right to stress the importance of reform for the sake of everyone involved – children, families, schools and councils. But we have now reached crunch time. In the near term, ministers face a stark set of choices: slow the growth of SEND spending, accept an ongoing squeeze on mainstream school funding, and/or inject additional resources into education through higher taxes or reductions elsewhere. Reform must be part of the picture. The current system is increasingly costly and failing to deliver for everyone. Whether the government can both put the system on a stronger long-term footing, and manage to generate shorter-term savings, will be a crucial test for the forthcoming schools white paper.'

Josh Hillman, Director of Education at the Nuffield Foundation said:

‘Education spending in England is at a crossroads: tight budgets, escalating pressures, and shifting demographics demand hard choices to ensure opportunity and positive outcomes for all children and young people. What is clear from this latest analysis, is that without decisive action, rising SEND costs will dwarf available resources and undermine the promise of high-quality education, while uneven pupil numbers will force policymakers to choose between making savings or reinvesting to improve quality and reduce class sizes.'

ENDS

Notes to Editor

Annual report on education spending in England 2025-2026 is an IFS report by Christine Farquharson, Kate Ogden, Natan Ornadel, Nick Ridpath, Luke Sibieta, Darcey Snape and Imran Tahir.