Thursday, 12 February 2015

What do Labour's spending plans mean for schools?

Last week I wrote this on the Conservatives plans for school spending. My conclusion was that over the next Parliament their plans would mean a 10.5% cut to the amount schools get per pupil (depending on inflation).

Today it was Labour's turn to announce their plans. They pledged to increase the schools' budget in line with inflation and, unlike the Conservatives, they have extended this to include early years and 16-19 provision.

On the face of it this looks like a much better pledge for schools. And for early years / 16-19 institutions it is. However, Labour haven't pledged to increase budgets per pupil. So while the current budget for schools (5-16) will increase in line with inflation it won't be increased to take account of the very substantial increase in pupil numbers over the next Parliament. I estimate this will mean a cut to the amount schools get per pupil of 9.5% compared to the Conservatives 10.5%.

Here's my working:

  • The DfE predicts there will be 566k more pupils in 2020 than in 2015. As these children have mostly been born already this is a fairly safe prediction. Average per pupil costs are £4.5k a year but there will be larger proportionate increases in secondary and special school places which are more expensive than primary. When this distribution is taken into account (see detailed working at the end of the post*) the total cost is = £2.85 billion. The current schools budget is £41.6 billion so those additional pupils represent an effective 7% cut.
  • On top of this there are upcoming increases to schools contributions to teacher pensions and National Insurance that represent an effective 2.5% cut. These are explained in more detail in by blog on the Conservatives' plans.

This is actually much easier to calculate than the effect of the Conservative plans because it doesn't rely on assumptions about inflation. There will definitely be a cut in this range if pupil numbers rise as per projections. It also means that if inflation is lower than my assumptions the Conservative plans would actually better for schools than Labour's (unless they have a sixth form). Equally if inflation rises above my assumptions the Conservative cut grows whereas the Labour one stays the same.

Either way it now looks certain that schools will have a significant cut in their budgets over the next Parliament - though probably smaller than other public sector institutions outside of the NHS. All headteachers and business managers will need to work through the implications for their schools. Austerity is here to stay.

* According to the DfE figures there will be 307k more secondary pupils; 245k more primary pupils and 15k more pupils in special or alternative provision settings. The DfE doesn't publish per pupil rates for different stages but the average primary rate (before things like pupil premium and deprivation funding are added) was just under £3k. The KS3 rate was just over £4k and the KS4 rate was £4.6k. I have assumed the additional funding on top of this is roughly approximate between schools (primaries get more pupil premium but secondaries get more of other types of additional funding). Given the per pupil average is £4.5k I've calculated an additional primary place at £3.5.k and an additional secondary place at £5.75k (to balance KS3+ KS4). I've assigned a figure of £15k per place to special schools - this is definitely an underestimate but I can't find a source for the per pupil amount and I want to be conservative in my assumptions. So:

307k secondary pupils x £5750
245k primary pupils x £3500
15k special/AP pupils x £15000

= £2.85 billion.

Because of the lack of data this is an estimate and may be out by half a percentage point or so either way.

Monday, 2 February 2015

What do Conservative spending plans mean for schools?

Just after the Prime Minister's speech on education earlier today I tweeted:

"PM confirms Tory school spending plans for next Parliament - flat cash per pupil. Combined with NI/pension changes = at least 10% cut".

This got picked up by a few news outlets this afternoon as a source for how big the cut would be. So I thought I better explain my working and add a few other points too detailed for a tweet.

I derived the "10%" from two things.

First, over the next couple of years schools will need to pay around £350-400 million more into teacher pensions as employer contributions increase. In addition there will be an additional £550-600 million more national insurance for schools to pay as a result of changes to state pensions in 2016. These figures come from a very helpful paper produced by the Association of Colleges. The schools budget is £41.6 billion so these changes represent a cut of around 2.5%.

Secondly, the "flat cash per pupil" settlement announced by the PM today means that from 2016 schools will not see their income rise in line with inflation. Based on the latest Bank of England estimates I've assumed inflation will run at: 0.5%; 1.5%; 2%; 2%; 2% over the next Parliament - 8% in total.

Add 8% to 2.5% and you get a 10.5% reduction in the amount schools receive per pupil. Obviously if inflation is lower the cut will be lower and if higher the cut will be higher.

Some additional points:

  • The vast majority of school spending is on staff and we can probably expect pay rises of 1% to continue (though schools have freedom over this so could choose to pay more or less). This means that, in practice, they won't feel the full 10.5% cut as their main area of expenditure will increase at levels below inflation.
  • On the other hand the protection announced today doesn't cover either the pupil premium or 16-19 budgets. These could be cut by more. 16-19 has been cut over this Parliament so schools with sixth forms are already hurting.
  • Moreover other budget cuts to welfare and social care have knock on effects on schools that aren't accounted for. This is, naturally, especially true of schools in poorer areas.
  • It is not yet clear whether these cuts will hit all schools equally. The current Government plans to shift to a National Funding Formula after this election. This could mean some schools in currently overfunded areas lose more while others receive some protection. As schools have surpluses of £4.5bn at the moment - that are not evenly distributed across the country - this would be sensible.

It's also worth noting that, given overall Conservative spending plans, this settlement will still leave schools much better off than other non-health departments like the Home Office. Moreover schools have had a relatively generous settlement this Parliament - seeing their revenue funding increase on average by 1% per pupil in real terms (not including 16-19 spending).

Labour and the Lib Dems plan to cut less over the next Parliament so have more leeway. Labour have not yet revealed their plans, and I'll update this blog when they do. The Lib Dems have promised to protect all education funding from 3-19 in real terms but have not yet said if this will be a "red line" in coalition negotiations. As all parties have accepted the NI/pensions changes even "real terms protection" will feel like a small cut.