Thousands of schools will face significant extra cuts, despite a far better than expected Department for Education spending settlement, it emerged today.

The DfE has managed to negotiate a real-terms cut of just 6 per cent to unprotected areas of its spending, much lower than the savings of 20-25 per cent that TES understands had been discussed with the Treasury.

But the settlement, announced as part the chancellor’s spending review today, was not generous enough to stave off extra cuts to academies’ funding that were first revealed by TES last week (article available free to subscribers).

Under plans announced today, the education services grant - which is handed to academies to cover the cost of services that would otherwise be provided by local authorities - will be slashed by £600 million, with the additional funding that schools receive being phased out altogether.

TES reported last week that ministers were considering further reductions to the grant, which has already been cut by £200 million this year.

Mr Osborne said today that his measures added up to a “comprehensive reform of the way education is provided, from childcare to college”. Other measures announced by Mr Osborne include:

• As expected, a new national funding formula for schools will be introduced from 2017-18. The current system, in which funding is based on historic data, had “systematically underfunded schools in whole swathes of the country”, he said.
• The amount of cash in the “dedicated schools grant” - schools’ core funding from the government - will rise.
• Mr Osborne said the government would “help every secondary school become an academy”, adding that he wanted local authorities running schools to be “a thing of the past”.
• Sixth-form colleges will be able to become academies so they no longer have to pay VAT.
• Pupil premium funding and funding for free infant school meals will be maintained.
• Total funding for education, including childcare, further and higher education, would rise by £10 billion.
• 500 new free schools and university technical colleges will be opened.
• £23 billion will be spent on school buildings.
• 600,000 new school places will be funded.
• Core adult skills funding for FE colleges will be protected in cash terms and the “base rate” of funding for 16- to 19-year-olds will be maintained.
• Mr Osborne announced the “largest ever investment in free childcare”, with 30 hours of free care available from 2017 for working families with three- and four-year-olds. Free childcare for the most disadvantaged two-year-olds will be maintained. Funding to nurseries will rise by £300 million.

Schools’ per-pupil funding for five- to 16-year-olds has been frozen in cash terms for the rest of the Parliament, although many schools are facing a real-terms squeeze because of the impact of rising costs such as extra pay, pensions and National Insurance contributions. Figures published by the Institute for Fiscal Studies last month showed school spending per pupil was expected to fall by about 8 per cent in real terms between 2014-15 and 2019-20.

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