Schools in financial peril: Funding shortfalls, rising costs, and the threat to education quality

26 March 2025, 11:56

Many schools and colleges are already in a very difficult financial position following years of underinvestment from successive governments.

In a recent report, the Institute for Fiscal Studies (IFS) revealed that education spending fell as a share of national income from 5.6% in 2010/11 to 4.1% in 2023/24.

Despite the pressures that schools have faced during this time, there are few signs that things are going to improve.

The government has proposed a 2.8 per cent teacher pay rise for 2025-26, which most schools cannot afford and which the Department for Education acknowledges will entail them having to make further ‘efficiencies’. Salary negotiations for support staff are underway and, once agreement is reached, will be effective from 1 April 2025.

Schools are very limited in the ways in which they can save money. Staffing costs are the single biggest area of expenditure in a school budget and therefore, anytime schools are faced with the prospect of needing to make savings, jobs can be put at risk. The impact of any redundancies is quite likely to be an increase in class sizes and a narrowing of the curriculum offer.

When ASCL surveyed school leaders last year about the impact of funding insufficiency, nearly three-quarters said they will have to increase class sizes and almost 60% said they will have to reduce their curriculum offer. On top of this, 62% would have to run an in-year deficit budget.

Alongside the unfunded pay award, there are also concerns that funding provided for increased national insurance contributions is insufficient to cover the increased costs for schools.

These new issues are compounded by the longer-term shortfall in capital funding, needed to repair and maintain school buildings, and the funding crisis in the SEND system.

There is a therefore a huge amount of work that needs to be done to put education funding on a sustainable footing.

We completely understand that the country is facing a number of economic challenges, including weak growth, stubborn inflation, and widening inequality, and that the government has to make some unenviable decisions.

However, amidst these economic uncertainties, it is important to recognise the transformative role that education plays in driving recovery and the long-term prosperity of the nation.

Access to high-quality education for all is not just a moral imperative but a strategic response to economic instability, enabling the workforce to adapt, compete globally, and contribute meaningfully to rebuilding the nation's economic foundations.

This can only happen with the foresight to invest in education now, and focus on the long-term benefits this will provide the country, rather than the short-term costs.

Julia Harden is a Funding Specialist at the Association of School and College Leaders (ASCL)

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