IFS: Growth in school costs significantly outpacing inflation

The government is currently presiding over an increase in schools funding in England which is reversing past cuts to per-pupil spending. We project that school spending per pupil in England will be about 3% higher in 2024 compared with its past high-point in 2010, after adjusting for economy-wide inflation.

But general measures of economy-wide inflation are not currently providing an accurate picture of the cost pressures actually faced by schools. Their costs are growing faster than economy-wide inflation, particularly support staff pay, energy and food costs. As a result, school funding and costs are growing at similar rates between 2021–22 and 2024–25, leaving school budgets to largely stagnate in real terms. This would leave the purchasing power of English school budgets in 2024 about 3% lower than in 2010.

Luke Sibieta, Research Fellow at the Institute for Fiscal Studies said: 

‘Schools are currently seeing large cash-terms increases in funding, which look like large real-terms increases when using standard ways of tracking government spending. However, schools are also currently facing rapid rises in costs, particularly support staff pay, energy and food costs, which are not captured in those standard economy measures. School funding per pupil is in fact increasing by only just about enough to keep pace with overall school costs. Policy debate should reflect the acute pressures on school budgets.’

Read more here.

Sector Response

Julia Harnden, Funding Specialist at the Association of School and College Leaders, said:

“The government loves to talk about the amount of money it is spending on education, but this report shows up these facile boasts for what they are. The reality is that the extra funding that has been provided, following years of cuts, is being swallowed up by rising costs and school budgets remain under enormous strain.

“We have long warned that the standard inflation measure does not produce a realistic picture of the pressures that schools and colleges are facing. Funding needs to reflect the real-terms inflation that the sector is dealing with. Otherwise, you end up with politicians talking about record levels of investment, when schools in actual fact have less spending power than they did in 2010.

“We also support the IFS’s call to bring forward the process for agreeing teacher and support staff pay to earlier in the academic year. This unnecessary delay hampers school leaders when trying to plan and manage already tight budgets for the forthcoming school year.”

Paul Whiteman, general secretary of school leaders’ union NAHT, said:

“This is a crucial report that shines a spotlight on the specific financial challenges school are currently facing. It identifies something that some in government have not properly understood up to this point – that schools’ costs are actually running ahead of general inflation. This is why the government’s talk of ‘record funding levels’ feels so far from the reality of what school leaders are experiencing when it comes to their budgets. The truth is that in real terms government has failed to invest adequately in pupils’ education for over a decade. The prime minister has said that education will be his priority for all future spending rounds – he must now deliver on that promise.”

Daniel Kebede, General Secretary of the National Education Union, said:  

“This report is a valuable contribution to the debate. It highlights that the headline figures on education funding do not translate into funding increases per pupil once school-specific costs are taken into account.

 “Rapid rises in food and energy costs mean school budgets are yet again being stretched further. The NEU is also concerned that inflation is proving more persistent than expected in the 2022 Autumn Statement. If this continues then education will have lost out in real terms even ignoring school-specific costs.

 “The education system also needs to deal with past underspending on capital projects, which has resulted in the RAAC crisis. We currently spend around £2.6bn a year on capital. It needs to rise to at least £7bn a year to fix the school estate.”

Liberal Democrat Education Spokesperson Munira Wilson MP said: 

“Today’s IFS report mirrors what I am being told by head teachers day-in and day-out. Schools are struggling to make ends meet.  

“School trips are being axed, teaching assistants are being laid off and urgent classroom repairs are being ignored as buildings crumble. The lack of proper funding means pupils with additional needs won’t get the support they need and activities like performing arts clubs will be stolen away by this Conservative government.

“Rather than investing in the next generation, children are having to pay for this Conservative Government’s economic incompetence.”