Delivering his Autumn Statement last week, chancellor Jeremy Hunt announced £20 billion of further spending cuts to public services. Not explicitly, of course, but that’s where all the money for his tax cuts came from.
High inflation has pushed up tax receipts, but public sector organisations have been expected to get by without inflationary increases in budgets. Thus the “extra” cash for Hunt to throw around in the hope of minimising next year’s election defeat.
On top of this, another round of cuts have been pencilled in for after the election, which creates huge uncertainty for public sector leaders. For the time being, Labour is going along with the government’s proposals.
But in reality, austerity 2.0 is simply not viable, given the state of the public realm: NHS waiting lists at 8 million, overflowing prisons, crumbling schools and all the rest.
Because neither of main parties wants to be honest about this right now, we have little idea what the real picture will be.
School funding under pressure
The Department for Education is the third largest spending government department after the Department for Work and Pensions and the Department of Health and Social Care, spending well over £100 billion a year. But some of this is complex accounting for student loans. In 2022-23 the department actually allocated around £76 billion on day-to-day spending.
The vast majority of this went straight out of the door to institutions in core grants: £54 billion to schools for four- to 16-year-olds, £11.7 billion for post-16 education and £3.6 billion for nurseries. Of the remaining £6.5 billion, around £2 billion went on direct support to individuals through, for example, student support grants and free school meals.
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That leaves around £4.5 billion. This includes a mix of administrative costs, specific grants to schools like the primary school sport premium and the National Tutoring Programme, money for teacher training and professional development, and a discretionary pot for ministerial priorities like Nick Gibb’s curriculum programmes.
Current figures imply a cut of around £2 billion in the DfE budget by 2028. This would probably be just about achievable by eliminating discretionary spending and banking savings from school rolls falling due to decline in birth rate.
But then you have to factor in pay increases for school, college and nursery staff. At 2 per cent a year that would add around £5 billion to annual DfE costs. And then there are the rising pressures on special educational needs and disabilities budgets, which have been going up by around 10 per cent a year - a trend that shows no sign of stopping.
Plus, schools are facing huge challenges because of rising poverty and worsening child and adolescent mental health. As a former civil servant recently said to me, schools get enough money to do their job, unfortunately they don’t get enough money to also do the job of food banks, counselling services, family support and so on.
On top of all this, we have a teacher recruitment and retention crisis that we will almost certainly require above-inflation pay increases to solve. And, of course, if a new government wishes to pursue any of its own new policies, these will have to be paid for, too. It’s obvious that the numbers just can’t be made to add up.
Crumbling buildings
The picture on capital spending is, if anything, even more grim. The DfE spent £5.7 billion last year, mostly on schools. This isn’t nearly enough, as the summer’s “crumbly concrete” scandal showed.
The schools maintenance backlog is at least £11 billion and almost certainly a lot more than that. There are hundreds of buildings in a terrible state that are over a decade away from any support through the existing rebuilding programme.
Not only did the Autumn Statement not acknowledge any of these problems (and they exist in every public service) but it also proposed a 15 per cent or so cut to capital budgets. This is nonsensical. The bigger the maintenance backlog gets and the longer it is left, the higher the eventual rebuild and repair bill.
To be clear, I don’t think the planned cuts will happen.
The next government, likely a Labour one whose backbenches will be packed with people who have direct experience of working in local government, health and education, will simply not be able to do this. It will have to raise taxes, or borrowing, or both.
But because it won’t say so, we have, for now, no idea of what the real picture will be. All school leaders can do for now is plan on the assumption that money will continue to be exceptionally tight for the foreseeable future, and hope for the best.
Sam Freedman is a senior fellow at the Institute for Government and a former senior policy adviser at the Department for Education
