School room

Education spending - introduction

Funded by the Nuffield Foundation

Education spending is the second-largest element of public-service spending in the UK behind health, representing £116 billion in 2024–25 in today’s prices or about 4.1% of national income. To make efficient and equitable policy choices, it is crucial to have a clear, consistent picture of how the level of spending at each phase of education has changed over time, the expected future changes and the factors driving these changes. Such issues are a vital component of policy debate, given evidence showing how education investments at different ages combine to drive long-run outcomes (Cunha, Heckman and Schennach, 2010; Johnson and Jackson, 2019).

In a series of annual reports on education spending funded by the Nuffield Foundation, we have sought to cast light on this subject by illustrating how spending per pupil across different stages of education has changed over time. We also publish a range of smaller outputs throughout the year to provide more timely and rapid analysis of the resource challenges facing different phases of education. This analysis is housed here on our dedicated microsite, providing easy access to the latest figures and the underlying methodology.

The new government has high ambitions to improve education and reduce inequalities. However, like most governments in recent years, it faces a very challenging set of public finances, maybe even more challenging than the situation faced by past governments. In the Autumn Budget 2024, the government chose to top-up departmental spending plans for 2025–26, including a £2.3 billion increase in the schools budget in England. Public-service spending will, over the two years from 2023–24 to 2025–26, grow by an average 3.4% per year in real terms. Departmental spending plans for 2026–27 and 2027–28 will be determined in next year’s spending review. For these two years, the government has pencilled in real-terms increases in overall day-to-day spending on public services of 1.3% per year. However, once likely spending commitments on the NHS, defence and expansions to early years entitlements are accounted for, other areas would very likely face the need to make spending cuts. These would be cuts made from a higher level, following two years of budget increases – but cuts all the same. There is naturally quite a bit of uncertainty around the precise scale of the cuts facing those areas – it matters a lot, for instance, how much cash goes to the NHS, or whether geopolitical developments necessitate a sharp increase in defence spending – but the overall message is clear. On current plans, most areas of education will be asked to find real-terms savings after 2025–26. 

At the same time, the cost of special educational needs (SEN) provision is spiralling up by the billions, spending on skills and further education is low by historical standards, and the government faces a delicate balancing act between asking indebted students to pay more for their studies and universities warning of insolvency. It is, of course, possible that these spending plans won’t be implemented. Indeed, historic experience suggests that tight spending plans are likely to get topped up when a spending review comes along and specific choices have to be confronted. But the government has minimal room for manoeuvre against its fiscal rules and the Chancellor has ruled out further tax rises, and while the government could get lucky on growth, there’s every chance that global events weigh on the UK’s economic prospects. This is a delicate fiscal balancing act.