In July 2015, when the spending review kicked off, the Treasury asked all central government departments for options for cutting their budgets by 25 per cent and 40 per cent. It was reasonably clear at the time that 40 per cent was a negotiating tactic, but general consensus among education watchers was that the relevant bit of DfE would be cut by around the lower figure (with BIS likely to make a higher cut in their HE and FE space).

At about 1.15pm today, the chancellor announced that the DfE’s unprotected budget would go down by just 6 per cent in real terms between now and the end of the Parliament. In cash terms, the budget will actually rise - from £53.6 billion to £57.1 billion. (BIS budget will be cut by 17 per cent, but again the fears of many in FE that their budget would be decimated have not come to pass, with adult FE spending being protected in cash terms).

This is a staggeringly good result for DfE and the education system in general. Before today, we knew that core 5-16 schools funding would be protected in cash terms per pupil. The spending review has now confirmed this (in fact, owing to a slight increase in the budget, it is now technically being protected in real terms at an aggregate level). But the spending review also had good news for the unprotected areas of the DfE’s budget. The capital budget has been increased by £7 billion over the previously announced figure, which will pay for much-needed school places across the country, including in 500 new free schools.

Childcare funding has more or less stayed the same - including an extra £300 million to increase the hourly rate paid to providers from 2017 - although the eligibility requirements for the new 30 hours of free childcare have slightly (and sensibly) been tightened. Similarly, the core funding rate paid to schools and colleges for 16-18 learners, which was also in many people’s sights, will stay the same in cash terms. And sixth-form colleges, so often the forgotten part of the forgotten FE sector, will be allowed to become academies, with the Treasury having finally and sensibly agreed to waive the VAT that they are required to pay and which has prevented this from happening in the past.

So where’s the sting in the tail? Three things; two old and one new. The first is that the core budget for schools (and colleges for 16- to 18-year-olds) will only be protected in cash terms, not real terms, so inflation will partly eat away at it. Second, the national funding formula, confirmed today, will likely mean some sort of reallocation away from some schools towards others. And the third, which was newly announced today, was a scrapping of Education Services Grant (ESG) for Academies by the end of this Parliament (although a small amount will be retained for local authorities to spend). This is funding used for services that academies don’t get for free from their local authority - eg, welfare and pastoral services, attendance support and so on. It has been in the government’s sights before - it took a £200 million cut for 2015-16, and the remainder of schools’ share (about £600 million) will now taper away by 2020. ESG is worth £87 per pupil, so a 2,000 pupil Academy will take a £174,000 cut per year.

There’s no doubt then that schools will still feel chill winds in the next few years through a combination of the three factors above. But there is also no doubt in my mind that in a trade off where the options were to cut childcare, to further cut 16-18 funding, or to remove ESG, the best option has been chosen. (It should, however, be noted that the continuation of universal infant free school meals, by pure coincidence, comes to around the same amount as that saved through the abolition of ESG.)

All in all, if I were working in a nursery, school or FE college today, I would be breathing a huge sigh of relief.

Last week’s Whispers from Westminster column can be found here (article available free to subscribers). 

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