Education matters a lot to Rachel Reeves.
As the chancellor said in her Budget speech, it was her experience of attending an underfunded school in temporary playground cabins that got her into politics in the first place. One of her deepest convictions is the value of comprehensive education, and schools as a route to increasing social equity (thus her determination to tax private schools).
At a time when the national accounts are in a parlous state and there are few resources to go around, having a chancellor who really cares about education is handy.
Given that, it shouldn’t be surprising that yesterday’s Budget saw a relatively positive outcome for schools in the immediate term.
Schools will get 2.3 per cent more core revenue funding this year and 1.4 per cent more next year in real terms.
There’s also a chunky 19 per cent increase in capital funding next year, albeit following a 12 per cent drop this year.
Filling holes
The problem is that most of this money is just filling holes left by the last government. It had not provided any cash for this year’s pay awards, nor even properly covered the cost of last year’s.
Most local authorities have built up substantial cumulative debts on special educational needs and disabilities (SEND) budgets as demand for education, health and care plans (EHCPs) has shot up.
The last government’s programme to rebuild 500 schools was way off target and underfunded. Elsewhere there is a huge maintenance backlog.
So the new money will be spent absorbing all these pressures in this year and next. (There will be extra to cover the cost of additional employer national insurance contributions that will be announced in April.)
Frontloading the Budget
This would be fine if the purpose of this Budget was to steady things before embarking on the process of more comprehensive improvements.
But, unfortunately, it doesn’t look like there’s much left in the kitty after the increases in education (and other departments) next year. Nearly all the additional spending the government is able to afford off the back of tax rises and extra borrowing is used up by 2026.
Frontloading Budgets like this buys some time - it will prevent the SEND system from falling too much further into debt, cover the costs of teacher salary rises and ensure existing capital programmes are properly funded. But if there’s no follow-up, it only puts problems off rather than solving them.
Yet it doesn’t look like there’ll be the opportunity for much additional investment, at least on the revenue side, in years two and three of the spending review, which will be announced in April.
There’s even less pencilled in for the final two years of the Parliament.
Unanswered questions
This raises some obvious questions. What happens if the School Teachers’ Review Body recommends another above-inflation rise in teacher pay? And if it doesn’t, how will unions react? Where will the money be found to actually reform the SEND system rather than just prevent debts from rising?
The same questions apply to areas of government spending that sit outside the Department for Education budget but have a big impact on schools.
Ministers have initiated a child poverty review, led by education secretary Bridget Phillipson, but there is now little money left to cover any recommendations it might have, such as abolishing the two-child limit.
In fact, the Budget will push more children into poverty as a result of freezes to the benefits cap and housing benefit.
Local authorities got a relatively generous settlement for next year, but again this largely just covers the holes left in their budgets as a result of the rising costs of adult and children’s social care. What happens after 2026?
Pressure on growth
On the capital side, things are a little more promising. There will be an opportunity there to invest more later in the Parliament, and I would expect schools to see benefits. It’s not clear though if there will be enough for a substantive new programme beyond existing plans.
With little scope for further tax rises or borrowing, Labour is very dependent on improved GDP growth if it is to be able to meet some or all of these costs as the Parliament continues.
If that doesn’t happen, it’s hard to avoid the conclusion that the government is going to find itself in real trouble.
Sam Freedman is a senior fellow at the Institute for Government and a former senior policy adviser at the Department for Education
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