Schools face £1bn funding hit over falling rolls, report suggests

School funding could plunge by over £1 billion in five years as the falling rolls crisis bites – prompting warnings that more budget cuts would be “catastrophic” to the sector. 

As school funding is closely linked to pupil numbers, the demographic change presents “imminent challenges to the education system and the financial health of schools”, the Education Policy Institute said.

The think tank, in a report published this morning, has urged government to commit to maintaining funding levels in cash terms. This means they could “reinvest” the excess cash to boost per-pupil funding rates.

Association of School and College Leaders general secretary Pepe Di’Iasio said the strategy would “put education on a more sustainable footing without costing any additional money”.  

“Schools must not be left to manage the huge financial risk that this change in the national picture presents.” 

Here are the report’s key findings…

1. £1bn drop in funding

Projections suggest pupil numbers will fall by 818,000 between 2022-23 and 2032-33, following a national birth-rate slump.  

The number of children in primary classrooms has been dropping from a peak of 4.7 million five years ago. EPI forecasts show it will  drop to 4.06 million in 2028-29. 

Secondary numbers will also tumble “at an increasingly faster rate” over the next five years. 

For the worst affected areas, this “could result in school amalgamation or closure”, EPI said.

Funding – which is based on the previous year’s pupil figures – is set to rise to £42.7 billion in 2024-25. 

It is not known to what extend school funding may rise in future years. But EPI said even if government increased per-pupil rates annually by 0.5 per cent, then the overall school funding pot would still fall to £41.6 billion by 2019.

2. Secondary schools to get bigger funding split

Total funding for primary schools is currently 5.9 per cent higher than secondaries. But the EPI projections show as their numbers drop, primary funding will be overtaken by secondaries in 2026-27, before both start a “downward trend”. 

The analysis is based on the schools block budget.

EPI researcher Robbie Cruikshanks said: “The scale of change projected in the pupil population presents major policy challenges to future governments.”

3. Northeast and London schools worst hit 

The report said primary funding will be dented across “all regions” over the next six years. The northeast will be hardest hit, with a decrease of 9 per cent. 

London and Yorkshire and the Humber are also set to see primary funding squeezed by more than 8 per cent. 

At secondary level, Yorkshire and the Humber (0.1), the northeast (1.2 per cent) and London (2.5 per cent) are the only areas expected to witness funding decreases. 

National Association of Headteachers general secretary Paul Whiteman warned any “further cuts” would be a “catastrophe for our children”.

But he urged the government to think “long term”, as “it would be a waste to allow smaller schools to close, only for there to be a need for more places … further down the line.”

4. How could savings be reinvested? 

Cruikshanks, who carried out the study, said policymakers must consider “how best to redistribute any savings created by” falling rolls. 

In his report, he considered “reinvesting” it to increase the basic entitlement factor that schools receive for each pupil on roll through the national funding formula (NFF). 

This would see per-pupil funding increase by a further £167 for primary children and £143 for those in secondaries by 2030.

In this scenario, the East Midlands would be given the largest funding lift, with London impacted the least. 

5. Areas to see deprivation rises as well

However, Cruikshanks noted such a change would disproportionately benefit “schools with lower rates of deprivation, mobility, and low prior attainment”. 

This is because a smaller proportion of the NFF “would be allocated through [its] deprivation and additional needs factors”. 

He thinks the savings could also be reinvested to boost pupil premium or “other deprivation factors”. 

“Some schools, particularly those in London and other urban areas, are likely to see … decreases in pupils and an increase in the rate of deprivation,” the report explained. 

“Significant falls in funding in these areas risks further widening of the disadvantage gap as school budgets struggle to meet the additional needs of disadvantaged pupils.”