WIREDGOV

New work looks at funding for education in England in 2025–26.

New estimates by the Institute for Fiscal Studies (IFS) find that growth in mainstream school funding per pupil in England in 2025–26 (2.8% in cash terms) won’t be sufficient to cover the expected increase in school costs (3.6%). Growth in school costs reflects the full effects of the 5.5% rise in teacher pay from September 2024, and the recommended pay offer of 2.8% for September 2025.

While pupil numbers are expected to fall by around 2% over the next two years, this is unlikely to allow for a cut in the overall schools budget. Rapid rises in the cost of special educational needs (SEN) provision seem likely to wipe out any opportunities for savings, evenif core per-pupil funding is kept constant in real terms.

These are the main conclusions of the new ‘Annual report on education spending in England: 2024–25’ by researchers at the IFS, published this week, and funded by the Nuffield Foundation. All figures are in 2024–25 prices and represent new IFS estimates of spending per pupil across different stages of education in England.

Also on schools

• Reversal of past cuts. Between 2019 and 2024, total school spending in England grew by about £8 billion. This led to 11% real-terms growth in school spending per pupil and fully reverses cuts since 2010.
• Over half of the rise in school funding has been absorbed by rising costs of SEN. After accounting for planned spending on high needs (which is a statutory requirement), we estimate that mainstream school funding per pupil grew by 5% in real terms between 2019 and 2024, rather than the 11% total increase.
• Potential savings from falling pupil numbers outweighed by rising costs of SEN provision. With pupil numbers expected to fall by 2% between 2025 and 2027, the government could make annual savings of up to £1.2 billion by freezing spending per pupil in real terms. However, the government also projects high needs spending will grow by £2.3 billion between now and 2027 without reforms. This makes finding savings in the schools budget impossible without cutting mainstream per-pupil spending in real terms.

Looking at other sectors

• Early years is set for the biggest ever increasing in funding. From September 2025, all children in working families will be entitled to up to 30 hours of funded childcare a week from nine months old. As a result, spending on the free entitlement will rise to £8.5 billion in 2026–27 from £4.2 billion in 2023–24 and £2.2 billion in 2010–11.
• Spending on colleges and sixth forms remains well below 2010 levels, and pressures are growing. Even with recent funding increases, we estimate that college funding per student aged 16–18 in 2025 will still be about 11% below 2010 levels, and about 23% lower for school sixth forms. About 37% of colleges were operating deficits at the latest count (2022–23). Average college teacher pay is expected to be about 18% lower than pay for school teachers in 2025, contributing to the high exit rates amongst college teachers (with 16% leaving their jobs each year). Meanwhile the number of young people in colleges and sixth forms is expected to grow by 5% or over 60,000 between 2024 and 2028. The government would need to increase annual funding by £200 million in 2027–28 in today’s prices to maintain spending per student in real terms.
• Increasing tuition fees in line with inflation will provide only slight reprieve for university finances after more than a decade of cash-terms freezes.International student numbers are likely to have fallen in 2024–25, and the rise in employer national insurance contributions will increase staff costs from April 2025. Unlike schools and colleges, universities are not being compensated for this increase. Meanwhile, in 2025 the poorest students will be entitled to borrow 10% less in real terms than in 2020 to cover their maintenance costs.

Luke Sibieta, IFS Research Fellow and author said: ‘This year’s spending review will bring a lot of difficult choices on education funding in England. A very tight picture on the public finances means that most departments, including education, will probably need to make savings. Working out exactly how and where is much easier said than done. Spiralling costs of special educational needs provision seem likely to wipe out any opportunities for savings in the schools budget from falling pupil numbers. College and sixth form budgets are already stretched, and will need to cover the cost of rising student numbers. The inflation-linked rise in tuition fees only provided a brief reprieve for university finances, and further tuition fee rises seem likely.’

Josh Hillman, Director of Education at the Nuffield Foundation said: ‘Amidst a tough fiscal climate and competing priorities, the IFS’s annual report delivers essential, independent analysis of the winners and losers in education spending. The analysis outlines the complex web of factors influencing the government’s decision-making on funding for the early years, school pupils, and further and higher education students. It highlights a range of challenges suggesting that the spending squeeze for schools and colleges will continue, but some gains for the under-5s.’

Annual report on education spending in England: 2024–25