Schools

This will help schools meet the challenge of faster rises in costs. Following a decade of cuts, this extra funding will ensure that spending per pupil is able to return to 2010 levels. However, with no net growth in spending per pupil over 14 years, this still represents a historically large squeeze on school resources. Throughout this chapter, we focus on current or day-to-day spending on schools (i.e. excluding capital spending).

Total school spending

Figure 5.1 shows total school spending per pupil aged 3–19 between 2003–04 and 2022–23 broken down into four different components:

• Funding allocated to schools. This includes funding directly allocated to schools and early years providers. Early years providers are included because primary school budgets include funding for nursery pupils in some years. This also includes funding for special schools.
• Local authority spending. This includes central spending on a range of services for pupils with special educational needs, admissions, transport, educational psychology and other services.
• Sixth-form funding. This is funding provided to schools for pupils aged 16–19. We include this given that it is often included within total school expenditure figures.
• Extra funding for employer pension and National Insurance contributions. From September 2019, schools received extra funding to meet the cost of higher employer pension contributions and, in 2022–23, they received extra funding for higher employer National Insurance contributions in preparation for the now cancelled Health and Social Care Levy. We often exclude these figures from comparisons over time as they are paid to compensate schools for higher costs.

In 2003–04 (the earliest year for which we can produce this consistent set of figures), total school spending stood at about £5,930 per pupil in 2022–23 prices. This rose by 22% in real terms up to 2009–10, reaching a high point of £7,260 per pupil. After 2009–10, spending per pupil fell by 9% in real terms to reach £6,640 in 2019–20, taking spending per pupil back to around the level last seen around 2006.

Up to 2009–10, each of the components rose by similar amounts. After 2009–10, the different components evolved very differently. Per-pupil funding provided to schools rose by around 5% in real terms between 2009–10 and 2019–20. In contrast, local authority spending on services fell by 57% over the same period. A large part of this contrasting pattern is mechanical, reflecting a transfer of funding and responsibilities from local authorities to both academies and maintained schools. There was also a big drop in sixth-form funding. As we show in Chapter 6, school sixth-form funding per student fell 24% over this period.

These figures represent the best measure of the change in total public spending available for school services in England over this period. They include the effect of cuts to local authority services, many of which schools will have had to fund from their existing budgets, and cuts to school sixth-form funding, which will have put pressure on secondary school budgets. If we exclude school sixth-form funding, school spending per pupil aged under 16 fell by 7% in real terms between 2009–10 and 2019–20. However, if we were able to fully exclude early years funding, this cut would become larger again as early years funding was growing in real terms over this period.

Since 2019–20, school spending per pupil has begun to grow again in real terms, reflecting extra funding provided in the 2019 and 2021 spending reviews. Between 2019–20 and 2022–23, total core school spending per pupil grew by 5% in real terms, taking it back to levels last seen around 2011 and 2012, or by 8% if we include funding to compensate schools for extra employer pension and National Insurance contributions. Note that figures were not collected for 2020–21 and we impute data for this year assuming a constant real-terms growth rate between 2019–20 and 2021–22.

Figure 5.2 projects total school spending per pupil up to 2024–25 based on the latest government spending plans and forecasts for pupil numbers and inflation. This includes the effects of the decision in the 2022 Autumn Statement to provide an additional £2.3 billion to schools in 2023–24 and 2024–25. For consistency, we focus on total school spending excluding compensation for higher employer pension and National Insurance contributions. We present two scenarios. The first shows expected future real-terms trends after adjusting for economy-wide inflation based on the GDP deflator. The second uses an estimated measure of schools-specific cost inflation, which includes expected increases in staff salaries and non-staff costs. Importantly, overall real-terms trends in spending per pupil look extremely similar whether we use economy-wide inflation or a separate measure of actual school costs between 2009–10 and 2019–20 (Britton et al., 2020).

As can be seen, spending per pupil is expected to increase in real terms using both measures of inflation. Accounting for economy-wide inflation, school spending per pupil is expected to grow by 7% in real terms between 2022–23 and 2024–25, taking it to 3% more than its most recent high point in 2010. If we account for schools-specific cost inflation, the expected real-terms growth rate is lower, at 5%. This reflects the fact that school costs are growing faster than overall inflation. This includes the over 5% increases in teacher salaries in September 2022, 8–9% growth in support staff salaries, and the growing costs of energy, food and other non-staff costs. However, even after accounting for these cost rises, school spending per pupil is still expected to grow in real terms in each and every year between 2021–22 and 2024–25. On this measure of inflation, school spending per pupil will return to 2010 levels by 2024–25.

That being said, no real-terms growth in school spending per pupil over a 14-year period still represents a significant squeeze on school resources. The only near precedent is the lack of real-terms growth in secondary school spending per pupil over the 1990s (see Figure 5.3).

Spending by primary and secondary schools

Figure 5.3 shows our estimates for the level of primary and secondary school spending per pupil in England over time (in 2022–23 prices), together with projections up to 2024–25 based on current policy and economy-wide inflation. The data we use to calculate these figures allow us to track spending per pupil by phase and further back in time to the late 1970s. To do this, we must focus on spending by individual schools, which excludes spending undertaken by local authorities and on special schools. The figures are therefore lower than those seen by Figure 5.1.

Spending per pupil has evolved in a number of distinct phases:

• Modest growth over the 1980s and 1990s. During the 1980s and 1990s, primary school spending per pupil grew by 2% per year, on average, in real terms and secondary school spending per pupil grew by slightly less (around 1% per year, on average). Over the 1990s, there was no overall real-terms growth in secondary school spending per pupil.[1]
• Rapid growth over the 2000s. From 1999–2000 onwards, spending per pupil grew rapidly, with growth of nearly 6% per year in real terms for primary and secondary schools over the 2000s. This led primary school spending per pupil to rise from £3,060 per pupil in 1999–2000 to reach £5,410 by 2009–10, whilst secondary school spending per pupil grew from £4,080 to £7,130.
• Funding squeeze since 2010 and increased role of individual schools. Following the large increase in spending over the 2000s, there has been a squeeze on funding since 2010. This has not, however, always been visible in the spending levels of individual schools. This is because school budgets received an artificial boost as maintained schools and academies both received extra funding to take on responsibility for services previously provided by local authorities (i.e. this was a transfer of funding, rather than an increase in funding for existing activities). As a result, over the decade between 2009–10 and 2019–20, primary school spending per pupil grew by 7% in real terms, whilst secondary school spending per pupil fell by 8% in real terms. This averages out to an effective real-terms freeze on spending per pupil by individual schools. Secondary schools saw a worse picture than primary schools mainly due to big reductions in school sixth-form funding. The Pupil Premium was also set at a higher rate in primary than in secondary schools. The 8% cut to secondary school spending is similar in scale to the 7% real-terms cut to secondary school spending over the first half of the 1990s.

• One-off effects of the pandemic. Based on school financial returns and official levels of economy-wide inflation, primary and secondary school spending per pupil fell by 4–5% in real terms in 2020–21. However, there are various pandemic-related factors working in either direction that mean 2020–21 is unlikely to reflect core trends in spending. First, these figures include additional COVID-related grants and funding (about £80–90 per pupil in primary schools and £110–120 in secondary schools), which include support for additional costs and catch-up funding. Further catch-up spending is likely to be captured in future years too. Second, these figures will include compensation for the additional cost of employer pension contributions. These factors are probably pushing up spending levels. Working in the other direction, economy-wide inflation was over 6%, well above the likely growth in school inputs. The closure of schools to most pupils over much of the period will also have reduced spending on some items, such as food and energy. Indeed, there is also evidence to suggest that school reserves increased significantly in 2020–21 across both maintained schools and academies.[2] Either way, spending levels in 2020–21 should not be used as a guide to underlying pressures on resources.
• Return of growth up to 2024. As a result of additional funding announced in recent spending reviews, core school spending per pupil is expected to grow in real terms through to 2024. If we assume that primary and secondary school spending per pupil grows in line with the total schools budget from 2019–20 (as per Figure 5.2), then spending per pupil would rise by 13% in real terms. This would take secondary school spending per pupil back to levels recorded in 2010 and primary school spending per pupil significantly above recent levels, though in both cases schools are also now undertaking more services previously provided by local authorities. These figures are based on inflation as captured by the GDP deflator. The expected growth rate is closer to 9% when we use our estimated measure of schools-specific inflation.

Summary and future challenges

In summary, school spending per pupil declined by about 9% in real terms in the decade up to 2020. This is now being reversed as a result of decisions at recent spending reviews to increase school funding in England. Like everyone, schools are facing significant cost rises as a result of rising levels of inflation. Partly in response to this concern, the government provided £2.3 billion in additional school funding in the 2022 Autumn Statement. This will ensure that school spending per pupil grows in real terms through to 2024 and will return to at least 2010 levels, even after accounting for the specific costs faced by schools. However, no net growth in school spending per pupil over a 14-year period still represents a significant squeeze on school resources.

The government has pencilled in tight plans for departmental spending beyond 2024. This could create significant resource pressures across all public services. When it comes to schools, the pressures might be lessened by the fact that the pupil population is expected to decline through to 2030, creating less demand for school places. However, it is important to remember that declining pupil numbers will only reduce pressures if schools are able to shrink their costs and staff numbers in an equal measure. This can create a whole set of new challenges.

[1]  These figures are lower than those quoted in previous analysis. This is due to historical revisions to the GDP deflator.

[2]  https://explore-education-statistics.service.gov.uk/find-statistics/la-and-school-expenditure/2020-21; https://www.gov.uk/government/publications/academy-trust-revenue-reserves-2020-to-2021.