Wednesday’s Budget, the first for the current Chancellor of the Exchequer, should give us further insight into the newly elected government’s priorities over the next five years.
Arguably, the government has already signalled its commitment to schools. Last September it announced an additional £7.1bn for schools over the next three years. Much to the government’s likely frustration, that announcement hasn’t, however, stemmed the debate about school funding. Indeed, the most recent intervention has come from Ofsted, where the Chief Inspector has suggested that funding pressures are causing some schools to narrow their curriculum offer.
But what is the reality for schools? As an independent research institute, we’re often asked whether schools have “enough money”. The reality is that this is an unanswerable question because there is no clear definition about what schools should be delivering. Even if there were, being able to cost that would be complex, inaccurate and almost certainly differ depending on the demographics and needs of pupils, the experience of teachers and the location of the school.
So while we can’t say whether schools have enough money, we can look at the trends in both how much money they’ve been given and how they have used that money. And that’s exactly what we have been doing in EPI over the past year. Using data published by the Department for Education, we have analysed trends in school income and expenditure to try and understand better how school funding is distributed, how schools are spending their money and how this varies between different types of schools and over time.
Taking a step back, we know from existing analysis by the Institute for Fiscal Studies that, in 2019-20, overall school spending was 40 per cent higher in real terms per pupil than in 2000-01. That’s the figure that the government often cites to highlight how much extra money has gone into schools over the past twenty years. But the IFS also finds that, between 2009-10 and 2019-20, funding per-pupil has fallen in real terms by around 8 per cent. Over the same period, local authority spending on children’s services also fell by around 20 per cent per child, including cuts of around £1bn to Sure Start Children’s Centres and £900m to youth services.
Another important piece of context is that the current school funding system is progressive; more money is allocated to disadvantaged schools than those in more affluent circumstances. And the gap between disadvantaged and more affluent schools has increased over time, particularly in London where the most disadvantaged schools received around 50 per cent more funding per pupil in 2016-17 compared to 2002-03. For the least disadvantaged schools outside of London, that figure falls to around 30 per cent.
So schools, on average, have more money in real terms than at the turn of the century. But not all schools will have seen the same level of increases and some will be feeling the pressure following cuts to both school and local authority funding over the past decade.
These pressures appear to have had an impact on the financial health of schools. The proportion of local authority maintained secondary schools in deficit (we don’t have comparable data for academies) has almost doubled from 14.6 per cent in 2009-10 to 28.3 per cent in 2018-2019, and the proportion of primaries in deficit has risen from 5.7 to 7.9 per cent over the same period (although in both cases there was a slight fall in between 2017-18 and 2018-19). Nevertheless, across all local authority schools there is almost £1.8bn in surplus balances, over half of which is uncommitted which, in theory, would be more than enough to wipe out the total deficit of £233m. In practice, however, this scale of redistribution would create significant policy and practical issues.
Our analysis has also considered how schools are spending their money and how this has changed over time. What is most striking is that while expenditure overall was increasing between 2002-03 and 2016-17 (the latest year for which we have data), spending on staff costs has increased by 3 per cent between 2009-10 and 2016-17, while spending on non-staff costs increased by around 16 per cent points over the same period. Meanwhile, spending on teachers increased at only half the rate of all staff expenditure.
In other words, back in 2002-03, for every pound that was spent by schools, 59p was spent on teachers. By 2016-17, that had fallen to 49p. So, for every additional pound that schools are spending today, around 76p is being spent on something other than teaching staff.
One of the areas which has seen the biggest growth is “education support staff” (this mostly refers to teaching assistants) where spending has increased by 138 per cent per pupil since 2002-03 (this compares to a 17 per cent increase in spending on teachers over the same period). Teaching assistants now represent over a quarter of the total school workforce. The reasons for this are unclear. Recent reforms to the way pupils with special educational needs (SEND) are assessed could account for some of the growth, but not all of it. Indeed, spending on support staff had already more than doubled by the time the reforms were introduced in 2014. While extra spending is correlated with disadvantage, there is still a wide variation in spending patterns amongst these schools, so we find that amongst the most disadvantaged schools expenditure per pupil typically ranges from £540 to £920 per pupil. This suggests that schools, even those in similar circumstances, are making very different decisions in relation to both spending and staff deployment.
Another significant issue is funding for pupils with SEND. Alongside a significant increase in the proportion of pupils identified as having SEND, recent reforms to the funding system have meant that funding is not always based on needs and there is limited flexibility to move money around from mainstream to special schools. School exclusions have also risen and the funding system means that mainstream schools have little incentive to admit or retain pupils with additional needs. As a result, we find that the proportion of special schools in deficit has risen from 9.1 to 12.5 per cent over the last decade.
So where does all of this leave us? As stated earlier, there will be an additional £7.1bn for schools over the next three years but, once we take account of inflation and rising pupil numbers, that figure falls to around £3.1bn. The government has also earmarked £780m in 2020-21 for pupils with high needs. Assuming that stays flat, this will bring the residual additional funding down to around £2.3bn by 2022-23. This isn’t an insignificant increase but, even then, schools will need to find money for increases to teacher pay and, specifically, raising the starting pay of new teachers to £30, 000.
The way in which the additional money will be allocated is also crucial. For example, as demonstrated in our new teacher labour market report last week, schools with more disadvantaged pupils tend to employ more teachers and more new teachers, meaning that their pay bill is likely to increase faster than other schools. But the government’s new funding formula doesn’t take account of that. As we set out ahead of last year’s general election, disadvantaged schools are likely to see only modest increases to their budgets next year while those serving more affluent communities are likely to see the largest gains.
All of this tells us that the complexities of the school funding system, combined with schools being able to make autonomous decisions about how they use their funding, means that it is difficult to draw firm conclusions about the state of school finances and whether schools are using the best available evidence when making decisions about spending. More detailed work needs to be done to understand better how leaders are making decisions and to consider whether there is genuine scope for efficiency savings.
In the meantime, it is clear that the government needs to keep focusing on schools serving the most disadvantaged pupils. The gap in attainment between the most disadvantaged pupils and their peers stands at just over 18 months by age 16, and for the first time in several years, has stopped closing. Trends suggest that this disadvantage gap may now be taking a new direction, where it begins to widen.
Additionally, the government needs to review both the quantum of funding for pupils with SEND and how that funding is allocated. As the number of pupils with SEND increases, the priority should be to ensure that these pupils are able to access an inclusive school (special or mainstream) with funding genuinely supporting both needs and choice.
The government has made a clear commitment to reach parts of the country that have been ‘left behind’ and has identified education as a vehicle through which to realise its ambition of ‘levelling up’. But as our analysis demonstrates, despite a series of interventions and a shift in aspirations, the same funding pressures that have affected schools in recent years are unlikely to recede in the years ahead.
Natalie Perera is Executive Director and Head of Research at the Education Policy Institute
Further analysis: School spending series from EPI