IFS - Cutting overall education spending would be difficult without cutting school and college budgets

29 May 2025 12:58 PM

The upcoming Spending Review is likely to involve cuts to many public service budgets.

If the Department for Education’s budget in England is cut in line with ‘unprotected’ areas of day-to-day spending, it could face a £2.6 billion or 3% real-terms cut between 2025–26 and 2028–29. Spreading that cut evenly would reduce school and college funding at a time of significant challenges. Protecting schools and the 16–19 education budget, as policymakers have often done, would require a more than 20% cut across areas such as adult education, apprenticeships, higher education support and other education funding.

These are the main conclusions of a new report – funded by the Nuffield Foundation – analysing the trade-offs and challenges facing policymakers on education in the Spending Review, with a particular focus on schools and colleges. All analysis relates to England only.

In the Spring Statement, the government set out plans for day-to-day departmental spending to grow by about 1.2% per year in real terms between 2025–26 and 2028–29. However, after accounting for the likely cost of existing commitments on defence, the NHS, overseas aid and childcare, analysis by IFS researchers suggests that ‘unprotected’ spending will fall by about 1% per year in real terms between 2025–26 and 2028–29, or by about 3% in total. This currently includes most spending by the Department for Education, excluding the early years and childcare. All analysis quoted below relates to day-to-day or resource spending within departmental expenditure limits.

Schools

• Falling pupil numbers in English schools mean that a 3% or £2 billion cut in day-to-day school spending would be delivered by freezing spending per pupil in real terms between 2025–26 and 2028–29. This would leave spending per pupil at a similar level to 2010.
• Past funding increases soaked up by rising costs. Since 2019–20, total school funding has grown by about £9 billion a year or 15% in real terms. About half of this has been taken up by the growing costs of special educational needs provision. Schools have faced rising energy prices, increasing wages and increases in other employer costs. Excluding high needs funding, mainstream school funding per pupil grew by 37% in cash terms between 2019–20 and 2025–26. This compares with an estimated 38% growth in the costs per pupil faced by schools over the same period.
• Spending on pupils with special educational needs is forecast to rise by over £2 billion between 2025–26 and 2027–28, driven by growth in entitlements. This will make it harder to cut school budgets over the next few years.

Colleges and sixth forms (ages 16–19)

• Rising student numbers in further education and sixth forms mean that maintaining per-student funding would require finding an additional £290 million a year. Freezing the 16–19 education budget in real terms would result in a 3% decline in funding per student.
• Past funding squeezes. Over the 2010s, funding per student aged 16–19 in colleges fell by 14% in real terms. Although additional funding has been allocated to further education more recently, spending in 2025–26 is due to remain 13% below 2009–10 levels.
• There is an acute need for additional teachers in further education colleges. According to official estimates, between 8,400 and 12,400 additional teachers will be needed by 2028–29 relative to 2020–21. Meeting the government’s high-profile pledge for 6,500 extra teachers through colleges alone would fall short of rising need. This high projected need is driven both by rising student numbers and by longstanding recruitment and retention challenges, which have left many colleges with fewer teachers than required. A key factor is pay: college teachers earn, on average, £7,000 (or 18%) a year less than their counterparts in schools.

Luke Sibieta, a Research Fellow at the IFS and co-author of the report, said: ‘The upcoming Spending Review will involve some difficult choices on education spending. There is pressure to protect school and college funding. School budgets have been squeezed by rising costs, particularly special educational needs provision. College funding per young person is already about 13% below its level in 2010. The government has also committed to increase teacher numbers by 6,500 across schools and colleges. But protecting school and college funding might mean cuts of more than 20% to spending on skills, apprenticeships and higher education support. Avoiding cuts to the education budget altogether would require deeper cuts to other public service spending, tax rises or extra borrowing.’

Josh Hillman, Director of Education at the Nuffield Foundation, said: ‘Decisions around the level and distribution of the Education budget made in this Spending Review will shape the opportunities available to children and young people for years to come. The evidence shows that short-term savings decisions risk undermining long-term outcomes – particularly in areas such as further education, skills and adult learning, which are crucial for productivity, labour market resilience and social mobility. If policymakers are serious about closing attainment gaps and building a more capable and inclusive workforce, they must prioritise strategic investment across the education system, not just in schools.’

Schools and colleges in the 2025 Spending Review