The money available to schools through the government’s latest Spending Review could mean teacher pay rises of around 2 per cent for the next few years and real-terms falls in actual budgets, experts have said.

The Institute for Fiscal Studies (IFS) has said that despite cash increases being announced for schools in the Spending Review, per-pupil funding could be held constant in real terms to allow for more spending on special education needs and disabilities (SEND) provision.

“That will probably mean real-terms falls in actual budgets received by schools as pupil numbers fall,” said Luke Sibieta, IFS research fellow.

This could be challenging in the short term as costs may not decline at the same rate as pupil numbers, according to Mr Sibieta, who was speaking at an IFS webinar on the Spending Review today. 

Assuming existing school budgets are frozen in real terms per pupil, all existing funding rates would likely go up in line with inflation forecasts of around 2 per cent, he said.

In terms of what would be available for teacher pay over the Spending Review period, “that would probably mean a default assumption of 2 per cent per year for teachers and other school staff,” Mr Sibieta added.

Teacher pay funding

The government has offered teachers a 4 per cent pay rise for 2025-26, accompanied by £615 million in additional funding for schools towards the rise.

This will not cover the rise in full; schools are expected to find the first percentage point through efficiencies, and the Department for Education previously said schools have headroom in their budgets to afford 1.3 per cent.

Support staff have been offered a rise of 3.2 per cent.

Chancellor Rachel Reeves announced on Wednesday that there would be a £4.7 billion uplift in the core schools budget over the Spending Review period. From 2025-26 to 2028-29, this amounts to a 0.4 per cent real annual growth.

The government said the extra cash will allow per-pupil funding to grow in real terms by 1.1 per cent a year.

The increase also includes £410 million per year by 2028-29 for expanding eligibility for free school meals.

Mr Sibieta also pointed out that Spending Review documents show the additional funding announced for teacher pay has not been added as an additional amount to the core schools budget for 2025-26 since the Spring Statement.

‘More than tight’

Commenting on the Spending Review settlement announced yesterday, Sir Jon Coles, chief executive of United Learning Trust, wrote on social media: “This is a more-than-tight settlement and can only be afforded if the costs of the high needs block are brought under control very quickly.”

Paul Johnson, IFS director, said yesterday that the schools settlement is tight and amounts to a real-terms freeze in the budget if the cost of expanding free school meals is stripped out.

He added: “Absent some serious cost-saving reforms, ever-growing spending on SEND is likely to swallow much or perhaps even all of that funding growth.

“With day-to-day budgets growing so slowly, there’s not going to be much room for further significant increases in public sector pay.”

Last year, the IFS predicted that high-needs spending would have to grow by more than £2 billion between now and 2027 without serious reform.

The government said yesterday that it will set out its approach to SEND reform in a White Paper in the autumn.

Spending Review documents show the government will spend £547 million in 2026-27 and £213 million in 2027-28 on reform of the SEND system. This money will come from a £3.25 billion transformation fund.

Last year, the government announced that £1 billion of the funding increase for schools in 2025-26 would go towards high-needs spending.

The DfE has been approached for comment.

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