Sector leaders have been told that schools will be funded to cope with the “net effect” in the rise in employer national insurance contributions (NICs) announced in the Budget yesterday, Tes understands.
The Department for Education has told sector bodies there will be compensation for the tax rise after warnings that schools would otherwise be forced to make more cuts to cover the increase.
Leora Cruddas, chief executive of the Confederation of School Trusts, told Tes: “We are pleased that the Department for Education has confirmed schools will be compensated to cover the increase in employer national insurance contributions.
“We have yet to understand the amount or methods of compensation, but the DfE has confirmed that the compensation will cover the net effect of all the NIC changes.
“The changes to national insurance are extremely complex and we will continue to work with the DfE to bring greater clarity on this.”
‘Devil in the detail’ of funding allocation
Chancellor Rachel Reeves announced that NICs will increase by 1.2 percentage points from April 2025 next year in the Budget.
The Treasury confirmed after the Budget that public sector bodies including schools would get additional funding for this.
However, Association of School and College Leaders funding specialist Julia Harnden said that the union will need to see the details of how the money is allocated to see “whether costs will be fully covered in every case”.
“What we’ve been told is that there will be more money allocated to schools and colleges to cover the national insurance costs,” she said. “We take that to mean that the intention is that schools and colleges will not be out of pocket, but the devil always tends to be in the detail.”
The National Foundation for Educational Research (NFER) estimated that adding 1 per cent to employer NI contributions would cost school budgets £175-200 million over the next year. This would increase to £350-400 million if NI contributions are increased by 2 per cent.
NFER chief executive Carole Willis said earlier this week that the government must consider funding schools to pay for any NI rise or “further exacerbate” funding issues schools are facing.
Schools were allocated an additional £2.3 billion in funding for next year in the Budget, with £1 billion set aside for special educational needs and disabilities.
However, Institute for Fiscal Studies (IFS) research fellow Luke Sibieta warned that much of this would get “swallowed up by ongoing cost pressures”.
The DfE and the Treasury have been contacted for comment.
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