Spending on education will “barely increase” in real terms over the next three years because of the sustained effects of high inflation, researchers have warned.
The Treasury established three-year spending plans for government departments, including the Department for Education, in a Budget and Spending Review in October 2021.
But analysis by the Institute for Fiscal Studies (IFS) shows that higher inflation is expected to wipe out more than 40 per cent of the planned real-terms increases in spending announced as part of the review.
And for education, this means spending would “barely increase” over the three-year spending review period, the report says.
Geoff Barton, general secretary of the Association of School and College Leaders (ASCL), said this meant schools would likely have to look at cuts to education provision, as well as running bigger classes.
IFS researchers say that to compensate departments fully for this drop in real-terms funding increases the Treasury would need to top up spending plans by more than £8 billion this year and around £18 billion in each of the next two years.
But they add that this could be an underestimate, as the calculations are based on estimations that are subject to uncertainty and may not capture the full extent of the cost pressures on hospitals, schools and other services.
School funding increase ‘less generous than planned’
Ben Zaranko, senior research economist at the IFS and author of the research, said that high levels of inflation had made the government’s public service spending plans “less generous than they were originally intended to be”.
“Choosing not to compensate departments for unexpectedly high cost pressures would be one possible response to a cocktail of global economic shocks that leave us poorer as a nation but would heighten the considerable pressures on public services heading into the winter,” he added.
Mr Barton said that the analysis showed the “devastating impact of soaring inflation on education”.
“Indeed, the reality in many schools, colleges and trusts is that they are facing massive hikes in energy bills as well as pay awards for teachers and support staff for which there is no additional government funding,” he added.
“It is very likely that this situation will result in cuts to education provision and larger class sizes as schools and colleges try to find ways to balance their budgets.
“The Conservative leadership candidates must respond to the call from the IFS to say how they will deal with the pressures on public services.
“The education of our children and young people is of critical importance to their life chances, to social justice and to the future of the country.”
Government to miss spending pledge
Last month, the IFS said the government was no longer on track to deliver on its pledge to restore per-pupil spending to 2010 levels in real terms by the end of this Parliament.
Speaking last year as chancellor, Rishi Sunak said that schools would get an extra £4.7 billion by 2024-25, which, combined with plans announced at the spending review in 2019, would restore per-pupil funding to 2010 levels in real terms.
But analysis by the IFS last week found that spending per pupil in 2024 will remain 3 per cent below 2010 levels, accounting for actual costs faced by schools.
The DfE announced last month that teachers who have been in the profession for more than five years will get a 5 per cent pay rise in September 2022 - an increase on the 3 per cent initially proposed by the government.
However, heads’ leaders have criticised the “unfunded” rise, warning that it will put some schools’ budgets into deficit.
Schools are also having to cut teacher numbers and teaching hours due to rising energy bills, research by a headteachers’ union found earlier this year.
In a survey of more than 1,000 school leaders, carried out by the NAHT school leaders’ union, 15 per cent of respondents said they were reducing the number of teachers or teaching hours to deal with rising prices.
A Treasury spokesperson said: “The plans announced at Spending Review 2021 mean that total departmental spending is set to rise to £566 billion in 2024-25 - a cash increase of £150 billion.
“The government has a continued focus on delivering our priorities efficiently and within budget, providing good value for money for the taxpayer.
“The government is taking important steps to get inflation under control through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost our productivity and growth.”
