IFS warns of cuts to school budgets amid rising costs

The pressure of rising costs on schools means that the government is no longer on track to restore spending per pupil to 2010 levels.

The IFS said that while spending in 2022-23 'is just about affordable' in government spending plans, by 2023-24 current spending plans will be real-terms cuts and by 2024-25, the IFS estimates that school spending per pupil will be 3 per cent lower than in 2010.

Between 2009-10 and 2019-20 school spending per pupil fell 9 per cent in real terms. In the 2019 and 2021 spending review, the government allocated extra funding to schools and stated that it would restore spending per pupil to 2010 levels by the end of the parliament in 2024-25.

Rises to teacher and support staff pay, food and energy costs are putting increased pressure on costs for schools.

Other key findings include:

• School costs are expected to grow by 6 per cent in 2022-23. The IFS estimates that teacher pay costs will rise by 4 per cent in 2022-23, including the effects of last year’s pay freeze, the 5.4 per cent average increase in teacher salaries in September and the new Health and Social Care Levy. Local government employers have offered support staff pay rises of between 4 per cent and 10.5 per cent in 2022-23. This implies increases in the average cost of support staff of at least 9 per cent. Rising energy and food prices are driving an increase in CPI inflation, forecast by the OBR in March to average 8 per cent over 2022-23, which seems likely to further increase non-staff costs.
  
  
• But cost increases look 'just about affordable' in 2022-23. Overall growth in funding per pupil is 'relatively high' this year (7.7 per cent) and is still likely to be above growth in school costs (6 per cent).
  
  
• Cost increases won’t be felt equally. A large amount of the extra funding this year has been allocated to the high-needs budget to reflect fast rises in the number of pupils with special educational needs. The expected growth in total mainstream school funding per pupil (6.8 per cent) is only just above expected growth in costs (6 per cent). Schools that rely more on support staff, such as special schools, will also likely see faster growth in costs.
  
  
• 'Real-terms cuts are likely after this year'– the IFS projects that school costs will grow by 4 per cent in 2023-24, which is above expected growth in school funding per pupil (3 per cent). In 2024-25, growth in school funding per pupil is expected to be only just above projected cost growth.

Luke Sibieta, IFS Research Fellow and author, 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 £4 billion 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.’

Ruth Maisey, education programme head at the Nuffield Foundation, which funded the research, said, ‘The Schools White Paper set a target that 90 per cent of primary pupils would achieve the expected standard in reading, writing and maths by 2030. However, the recent SATS results show that disruption during the Covid-19 pandemic has led to falling attainment levels. It is essential that the government addresses the cost pressures highlighted by this IFS analysis, to ensure that schools can deliver on ambitions for student attainment.’

Paul Whiteman, general secretary of school leaders’ union NAHT, said, ‘NAHT has been warning for months that the current unprecedented cost-of-living crisis is hitting school finances hard, and that the budgets schools set for the coming year are no longer balancing. We have said that there is a real risk that we are about to face another full-scale school funding crisis and this report supports that analysis.

‘The impact of massively increased energy costs, as well as the cost of food, amongst other things, has coincided with an unexpected increase in staffing costs, due to the government’s decision not to fund pay awards, leaving schools scrambling to find the money to pay it. School leaders are already worried that they simply won’t be able to make their budgets balance next year, let alone the years that follow.'

‘There is no doubt that the reality of the government’s current approach to education funding will lead to cuts to education, services and school staff next year. The government’s boast last year that it had restored school funding to 2010 levels was a feeble one, admitting a lost decade of no investment in education at all. It is now clear that even that meagre claim no longer holds true. For there now to be a real-terms decrease is scandalous – it is, after all, children that will ultimately suffer.’

Stephen Morgan, Labour's shadow schools minister, said, 'Twelve years of Conservative government has left schools doing more with less and the cost is measured in opportunities for our children. 

'The Conservatives are failing our children with staff numbers falling, school buildings in a state of disrepair and fewer trips, clubs and enriching activities. But Conservative leadership contenders would rather bluster about the return of grammars than pledge any real action to secure children’s education.' 

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 £7 billion by 2024-25, compared with 2021-22, with the total core school budget increasing to £56.8 billion.

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

• Download ‘School spending and costs: the coming crunch’, the IFS briefing note here