The next government will face “painful choices” for school spending amid budget pressures and falling pupil rolls, the Institute for Fiscal Studies (IFS) has warned.
With pupil numbers set to drop by 5.8 per cent between 2024-25 and 2028-29, freezing per-pupil spending in real terms could generate £3.5 billion in savings for the next government, the IFS said.
However, researcher Luke Sibieta warned that due to pressures facing schools, this would leave schools likely having to cut staff, or in some cases, to close.
Freezing total school spending
Even if school spending per pupil rose in line with expected costs up to 2028-29, the IFS said some schools could have to cut staff or close to deliver savings of £1.7 billion - though they would be in a better position to cover costs than if per-pupil spending was frozen.
Another potential option the next government could take is freezing total school spending until 2028-29 - leaving per-pupil spending to grow by 6 per cent while pupil numbers fall.
This would leave more money available for schools, though per-pupil spending would still only grow by around 1.5 per cent a year.
“Looking to the coming parliament, policymakers are caught between a rock and a hard place”, said Mr Sibieta.
“On current plans, many other areas of public service spending appear to be facing cuts under either a Conservative or a Labour government. An incoming government might thus be tempted to cut school spending in response to falling pupil numbers.”
Director of education at the Nuffield Foundation, Josh Hillman, said any savings from the fall in pupil numbers should be used to address the “major challenges hampering schools”.
Trends in school spending
Per-pupil school spending has returned to the same real-terms levels as 2010 in recent years, after schools faced a 9 per cent drop in per-pupil spending between 2010 and 2019.
The IFS said the lack of growth in per-pupil spending over these 14 years is “without precedent in recent history”.
The research institute calculated school spending has grown on average by around 2 per cent per year since the 1970s, and it grew around 5-6 per cent under the 1997-2010 Labour government.
The IFS has estimated school costs will grow by 4 per cent in 2024, leaving the purchasing power of school budgets to fall by 1 per cent.
These rising costs include those generated by high needs provision: the IFS said the increase in the high needs budget between 2015-16 and 2024-25 was about £3.5 billion, accounting for nearly half of the increase in school spending over that time.
Researchers also said the capital spending average over the past three years up to 2023-24 is about 25 per cent lower in real terms than the three-year average up to 2008-09.
The major teaching unions have all called on politicians to increase investment in education rather than making savings from a fall in pupil numbers.
Fixing recruitment and retention
While a significant amount of the cost increases facing schools reflect increasing staff costs, in 2024, average teacher pay in the UK is about 6 per cent lower in real terms than in 2010 - and about the same in real terms as in 2001, the IFS said.
At the same time, the sector is facing continuing challenges with recruitment and retention of teachers.
Researchers said it may work better to change teacher pay so it rises in line with average earnings each year - with lower increases justified on the state of the teacher labour market and wider economy.
The IFS also suggested “reweighting” teacher compensation away from pension contributions and towards salary could help with recruitment and retention challenges.
The Conservatives, Labour and the Liberal Democrats were all approached for comment.
