Autumn statement: Savings are possible – with care

In a few weeks, chancellor, Jeremy Hunt will set out his utumn fiscal statement. Government departments have been asked to find savings, including the Department for Education. With the school-age population now expected to decline over the next decade, there is actually potential room for savings in the schools budget – at least over the medium-term. However, schools are facing significant cost pressures as a result of rising levels of teacher and support staff pay, as well as rising energy and food prices.

Cost pressures on schools

Between 2010 and 2020, school spending per pupil in England fell by about 9 per cent after inflation. This is the largest decline in school spending per pupil in at least 40 years. In recent spending reviews, the government has allocated extra funding to schools. This was expected to allow school spending per pupil to return to 2010 levels by 2024.

However, the costs faced by schools have risen. Teacher salaries are rising just over 5 per cent this year. Support staff pay is likely to rise by 8 to 9 per cent on average this year and many schools face significant back-pay costs as the pay rise will apply from April 2022.

Schools have also faced rising energy and food prices. The energy price cap has put a lid on rising energy costs for the next six months, but the uncertainty of what happens after that will be unnerving for schools and trusts. Once we account for these extra costs, we expect that spending per pupil will stop growing this year and will still be about 3 per cent below 2010 levels by 2024.

The end of the population boom in schools

The mini baby-boom caused the pupil population to rise by about 13 per cent, or 800,000, over the past decade. As a result, the total schools budget has probably remained about constant in real-terms since 2010, even as spending per pupil fell. For some schools, rising pupil numbers will have slightly eased the financial pressures from the real-term declines in spending per pupil, with bigger class sizes the obvious way some schools have coped. However, an extra 800,000 couldn’t be accommodated by fitting a few more pupils into classrooms. It required more schools, more teachers, more support staff, more of everything.

That population boom has come to an end. The pupil population is now expected to fall by 4 per cent, or 250,000, over the five years up to 2027, and by a whopping 12 per cent, or 800,000, over the next decade. This will reverse all of the increase in the pupil population seen over the previous decade. Declines in the primary school population have already begun and they will gradually spread to secondary schools. The declines will be spread right across the country, but are expected to be fastest in London, the south east and the north east.

Managing the decline

At first sight, this might present an opportunity for an eagle-eyed chancellor to make savings. The government could commit to a real-terms freeze in spending per pupil, or even a small rise, and still make a saving in the overall schools budget. However, declining pupil numbers bring their own resource challenges, as many schools with declining rolls will attest to. The fundamental issue here is one of asymmetry: new schools were built and new staff recruited when pupil numbers were rising, but spending on those schools and staff is unlikely to now fall in line with pupil numbers. It is easier to open a school than to close one, but in years to come, some schools might become financially unviable – especially after a decade of real-terms declines in spending per pupil.

Managing the decline in the school-age population is the next great challenge for schools and policymakers. Doing it effectively will require careful strategic planning, as well as realism about the level of savings that can be achieved in the short-run.