Schools across England are facing even greater financial challenges than previously expected, as new funding allocations reveal that budget increases for the next financial year will be significantly lower than rising costs. Many school leaders now warn they will be left with no choice but to make further cuts.
Funding Increases Insufficient to Cover Rising Costs
The latest analysis from the Institute for Fiscal Studies (IFS) projected that school costs would rise by 3.6% next year, driven largely by salary increases and operational expenses. However, recent funding allocation letters sent to academy trusts show that per-pupil funding will rise by only 0.5% on average, leaving a substantial shortfall.
The government had announced an additional £1.3 billion for mainstream schools in the 2025-26 academic year during the autumn budget. However, approximately 1.3% of this increase will be needed to cover teacher pay rises already awarded for the current year. This leaves just a 0.9% funding increase for schools nationwide—far below the expected rise in costs.
For some schools, the situation is even worse. Many are set to receive less than the 0.5% average increase due to additional funding reallocations. For example, in Bedford, the local authority has been permitted to shift 0.9% of its core schools' funding—around £1.6 million—toward high-needs budgets to manage the rising costs of special educational needs and disabilities (SEND). This adjustment means that schools in the area will face an actual funding reduction of 0.3% per pupil.
School Leaders Express Deep Concern
Education leaders have expressed shock and frustration over the budgetary constraints, calling the funding shortfalls "simply not enough" to meet rising costs.
Julia Harnden, funding specialist at the Association of School and College Leaders (ASCL), stated: “The additional funding to support last year’s teacher pay award was welcome and necessary, and it is logical that it has been baked into school funding allocations. However, the amount of new money available for many schools is simply not enough to cover cost pressures over the next year.”
Benedicte Yue, Chief Financial Officer of the River Learning Trust, criticized the government's funding announcement as misleading: “The headline increase in school funding does not represent additional money, but the delivery of existing commitments. There is a growing disconnect between income and expenditure, and without additional funding, many trusts are projecting deficits in 2025-26.”
Paul Edmond, Chief Financial Officer at HEART Academies Trust, described the financial situation as "almost impossible." He explained that maintaining high standards for student attainment, staff retention, and safe school environments while facing a reduction in per-pupil funding is becoming unmanageable.
Future Uncertainty with Teacher Pay Raises
A major source of concern for school leaders is the government's recommendation of a 2.8% pay rise for teachers from September 2025. If the independent School Teachers’ Review Body suggests a higher increase and it is accepted, schools will be placed under even greater financial strain.
The Department for Education has defended its approach, stating:
“One of the missions of our plan for change is to give children the best start to life. We are determined to fix the foundations of the education system that we inherited and will work with schools and local authorities to ensure there is a fair education funding system that directs public money to where it is needed to help children achieve and thrive.”
With school budgets already stretched thin, many institutions are being forced to consider staff reductions, cuts to pastoral support, and limitations on curriculum offerings. Without urgent intervention, school leaders warn that the quality of education could suffer, placing even more pressure on an already struggling system. As the new financial year approaches, all eyes will be on the government to see whether additional measures will be taken to support schools in meeting their financial challenges.