On the face of it yesterday's spending review is good news for schools, but if you dig a little deeper it's clear that there will be winners and losers from this settlement.

Although the headline figures suggest that school funding will increase by 0.1% each year in real terms between 2010-11 and 2014–15, the non-schools part of the Department for Education's (DfE) spending will see a real terms decrease of 12 per cent. So, the key question here is, what counts as 'schools'? The answer, according to the DfE, is:

  • Funds allocated for one to one tuition
  • Funds allocated for 'every child programmes' such as Every Child a Reader
  • Extended schools
  • School lunch grant
  • School standards grant
  • School development grant
  • Specialist schools grant
  • Ethnic minority achievement grant
  • The National Strategies' budgets that were allocated to schools
  • Dedicated schools grant
  • Academies running costs

The non-school cuts will be achieved in part by cutting DfE administration costs, closing NDPBs and ending the Education Maintenance Allowances (EMAs) for 16–19 year olds. The DfE have agreed to reduce their administration costs by 33% in real terms by 2014-15. The Spending Review report suggests that EMAs will be replaced by "focusing support... on the most disadvantaged children in the context of raising the participation age to 18". Schools will be provided with targeted support to help children who face "genuine financial barriers" between the age of 16 and 18 to participate in education. It is also likely that funding for school sixth forms will be reduced significantly.


The schools (based on the above definition) budget will rise in cash terms from £35.4 billion in 2010–11 to £39.0 billion in 2014–15 (see Figure 1). Which in real terms, based on inflation predictions, means that school funding will rise to £35.5 billion in 2014-15; a 0.1% increase in each year of the Spending Review period.

Figure 1 - School Expenditure in Cash Terms

Pupil Premium

This real terms increase in funding is only possible because of the introduction of the Pupil Premium. The Pupil Premium was a Liberal Democrat manifesto commitment that was adopted by the Coalition. Last Friday (15 October 2010), Nick Clegg launched this premium by saying: "By the end of the Spending Review period, this pupil premium will grow to an additional £2.5 billion of investment each year". The Guardian has suggested that the Pupil Premium will be worth £5 billion over the whole of this parliament; this interpretation was supported by a DfE spokesperson who has confirmed that the Pupil Premium will build up over the Spending Review period and will be worth £2.5 billion in 2014–15.

Analysis by Cathy Newman at Channel 4 News states that £1.7 billion of the £2.5 billion comes from education cuts and £800 million from cuts to the welfare budget. So, although some of the funding is from outside of education, the majority is from recycling existing education budgets. It is clear that without the Pupil Premium and the freeze in public sector pay (which is expected to raise £1.1 billion) schools would actually be looking at a real terms decrease in their budgets.

The Pupil Premium will be targeted at pupils eligible for free school meals. This means that those schools with high incidence of free school meal eligibility are likely to see increases in their budgets, whereas those with low incidence may see their budget decrease. The Institute for Fiscal Studies (IFS) suggest that 60 per cent of primary school pupils will see funding fall in real terms, compared to 87 per cent of pupils in secondary schools. The IFS also point out that pupil numbers are expected to rise over the period of the Spending Review (see Figure 2) meaning that total per pupil funding will have to be cut by an average of 0.6% per year.

Figure 2 - Full time equivalent number of pupils (aged up to an including 15) by type of school in England. Years: January 1970 to 2010 (Actual) – January 2011 to 2018 (Projection). Source: DfE.

Specialist Schools

Specialist schools are also likely to see a reduction in their funding, which amounted to £450 million in 2010–11, as the additional funds that these schools receive will be distributed across all mainstream schools via the Dedicated Schools Grant from April 2011. Again, some schools benefit, some lose out. It has also been announced that the DfE will no longer fund the SSAT (£13 million in 2010–11).

Capital Expenditure

Although the DfE's total revenue expenditure will fall by 3 per cent in real terms, it is capital expenditure that will see the greatest decline. There will be a 60 per cent reduction in capital spending in real terms over the Spending Review period (see Figure 3), meaning that there will be a total of £15.8 billion for school rebuilding and refurbishment, modernisation and ICT hardware.

Figure 3 - DfE Capital Expenditure Limits

The Government's ambition is to replace or refurbish 600 schools over the period of the Spending Review. Last week, Michael Gove said that capital funding would be prioritised according to basic need (population growth), deprivation and dilapidation (the fabric and state of the buildings).

Early Years

It was confirmed that funding for 15 hours of free education for three-year olds and four-year-olds will continue. It was also confirmed that two-year-olds from disadvantaged backgrounds will receive 15 hours entitlement to early years education. Sure Start services will be protected in cash terms, but will be refocused on early intervention for families who need the most support.


Preliminary results from a survey conducted by RM Education after the Spending Review, shows that 53 per cent of head teachers thought that yesterday's Spending Review announcements were as they had expected; 41 per cent said they were better than expected and just 6 per cent thought they were worse. We'll be sharing more of this research over the next few days.

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