Budget 2024 – Key points for the education sector

  • 31st October 2024

Rachel Reeves delivers her first Autumn Budget. Image, Lauren Hurley/DESNZ

The Chancellor’s announcement of an £11.2bn increase in the Department for Education (DfE) budget has been welcomed by industry leaders.

However, they warn the extra cash for early years services, SEND systems, and further education will largely be negated by the decision to increase employer national insurance contributions and the rise in the national living wage.

Yesterday, the new Chancellor, Rachel Reeves, announced that spending on the education system in England will increase by £11.2bn from 2023‑24 levels by 2025‑26 – a 3.5% real-terms increase.

Key points of her speech for the education sector included:

  • Increasing funding for the core schools’ budget by £2.3bn, increasing per-pupil funding in real terms. £1bn of this funding will go towards supporting the special educational needs and disabilities (SEND) system
  • An additional £1.8bn to continue the expansion of government-funded childcare, providing young children with high-quality early education. Along with £30m being provided for the rollout of free breakfast clubs in thousands of primary schools, this will also help parents, and particularly mothers, to stay in, and return to, work
  • Providing an additional £300m for further education to ensure young people are developing the skills they need to succeed, and taking steps to transform the Apprenticeship Levy into a Growth and Skills Levy through a £40m investment. This will help to deliver on the commitment to launch shorter and foundation apprenticeships in key sectors

Key to the education property sector, and estates managers, was the pledge of £6.7bn in capital funding in 2025‑26 for education in England, a real terms increase of 19% from 2024‑25. This includes £1.4bn for the School Rebuilding Programme, an increase of £550m on this year.

The settlement also invests over £2bn into maintenance for schools and £950m for skills capital.

Peter Jackson

Commenting on this announcement, Peter Jackson, senior associate at UK and Ireland law firm, Browne Jacobson, said the Government must quickly identify a new finance model to replace PFI, which would underpin the delivery of education infrastructure projects moving forward.

He added: “A commitment to ramp up the School Rebuilding Programme will of course be welcomed by school leaders, who have long been trying to draw attention to the outdated and potentially-dangerous buildings on their sites – an issue that finally came to the fore in the reinforced autoclaved aerated concrete (RAAC) crisis that many believe is just the tip of the iceberg.

“Low confidence within the construction industry, resulting from high inflation and interest rates, has led to delays in getting the programme running at full speed, so extra funding should help ignite greater interest for projects.

“Whether the funding pledged will be enough to truly address an acute problem remains to be seen, however.

“The last major building programme in education was underpinned by the private finance initiative (PFI), which helped deliver almost 1,000 schools during the 1990s and 2000s.

“PFI was cancelled in 2018 after receiving criticism for issues including perceived poor value for the taxpayer and windfalls for investors that refinanced debt at lower rates following the riskier construction phase.

“But, with the National Audit Office last year identifying 24,000 school buildings as beyond their initial estimated design life, it’s unlikely the state will be able to fund a programme of this scale on its own.

“Therefore, the Government must identify a new private finance model that learns from the mistakes of PFI to ensure the public purse receives better value and control, while remaining attractive to the private sector – and can ultimately help bring our school estates into the 21st Century.”

And John Hutton, a former cabinet minister who now chairs the Association of Infrastructure Investors in Public Private Partnerships, said: “The Chancellor’s commitment to public investment in new infrastructure is to be welcomed.

“However, it will be impossible to get the scale of investment needed to get Britain building again without private financing.

“The UK is one of the only countries in the developed world that doesn’t use public private partnerships to build new schools, hospitals, and transport.

“We need a modern partnership between the private and public sectors that addresses the issues of the past if we’re avoid another lost decade of British infrastructure.”

Jon Andrews

Addressing the challenges

Commenting on the budget, Jon Andrews, head of analysis and director for school system and performance at the Education Policy Institute (EPI), told Education Property: “The Government’s first budget represented a key opportunity to set out how it would address the challenges in the early years and education sectors.

“Given the spending constraints imposed by the Government, and competing priorities, the limited offering is not unexpected, but there are systemic issues that the Government still needs to address.

“The announcement of a further £2.3bn for the schools budget represents a real-terms increase of 1.8% and of this £1bn has been earmarked for the high needs budget.

“The Government is right to prioritise funding for special educational needs, but £1bn represents a quarter of the deficits that the National Audit Office estimates that local authorities have accumulated.

“Given the perilous state of local authority budgets, clarity on how that funding will be allocated, or what it is intended for, is now urgently required.

“If the situation for local authorities has not been fundamentally changed, then we still risk services for our most vulnerable being cut.

“As well as additional funding, the system also needs to be reformed to ensure that the allocated funds are aligned with the true costs of providing support to all children who require it, so that unavoidable overspends do not reoccur in the future.

“The budget allocates an additional £300m to 16-19 education, which has seen greater cuts than earlier phases, and where spend is low against international standards, though we do not yet know how this will be allocated.

“We have previously called for funding to be better targeted towards disadvantaged students through a new ‘student premium’, similar to the pupil premium in schools. We estimate that this alone would cost £340m a year.”

Too little, too late?

And he warned that the cash could be eaten up by the announcements elsewhere in Reeves’ speech.

“Increases in employer national insurance contributions, including lowering the threshold at which employers will pay, creates a significant cost pressure for all parts of the system and will eat up much of any new funding,” he said.

“In addition, the rise in the national living wage will have a particular impact on an already-stretched early years sector.”

Laura Thompson

SEND funding

Commenting on the additional SEND funding, Laura Thompson, senior associate at Browne Jacobson, said: “It’s refreshing to see SEND placed at the centre of the education agenda, and commanding a significant slice of the core schools’ budget, given the acute nature of the challenges facing the system.

“Parents, as well as school and local authority leaders, will be eager to hear more from the Government about its plans for reform and how it will ensure investment in a system that currently costs £10.7bn a year, as set out in the National Audit Office’s recent report, can be spent better.

“Special school places are at a premium and mainstream schools have been struggling to support pupils with increasingly-complex levels of SEND for far too long.

“It is no coincidence that there has been a 24% increase in appeals to the SEND tribunal and a 71% increase in disability discrimination claims in the 2022/2023 academic year, compared to the year before.

“It will be interesting to see how the investment can be realised in ‘real terms’ and whether it will alleviate the pressure on the SEND tribunal.

“While the level of funding is significant, it is – unfortunately – only likely to paper over the cracks of a system that requires longer-term investment and, as the NAO report highlighted, requires whole-system reform.

“When special schools say they are ‘at capacity’, they mean it.

“The signal of prioritisation of the SEND system in today’s announcement of a £1bn investment is a welcome start but, just as the Government is launching a 10-year plan for the NHS next year, it needs to quickly follow up with a plan for reform of the SEND system to make it work better for all stakeholders – as is so desperately required by those most in need.”

Tom Wallace

Breakfast clubs

On the enhanced rollout of free breakfast clubs and rise in employer national insurance contributions, Tom Wallace, Browne Jacobson’s head of HR services, adds: “While schools will welcome the benefits that tripling the free breakfast club rollout will have on parents, this will likely lead to staff resourcing issues at a time when they are already grappling with a recruitment and retention crisis across all roles.

“Coupled with the headache caused by a rise in employer national insurance contributions, we may approach a situation in which staff are being asked to work beyond their usual hours on more occasions, while at the same time find their opportunities for pay progression are limited due to the tighter financial constraints engulfing schools.

“The need for schools and academies to take a fresh look at how they can make the teaching profession, in particular, more attractive has therefore never been more important if they are to keep hold of their best talent, an issue that is often cited as a primary objective in our School Leaders Survey.

“Embracing out-of-the-box thinking could help bring small changes that reap big rewards in making the teaching profession more attractive, helping it to compete better against other vocations that may be able to offer higher salaries, better benefits and greater flexibility.”

David Eaves

Early years

David Eaves, director of childcare and education at Christie & Co, agrees that much of the money pledged to education will be negated by other areas of the budget and said it would likely lead to fee increases.

He said: “Against the backdrop of the expansion of funded hours to include children under two years, the announcement that minimum wage for 18-20 year olds will increase by 16%, living wage for those 21 and over will increase by 6.7%, and apprentice wages by 18%, will immediately offset a significant proportion of the benefit afforded by the funded rate being paid by local authorities for those youngest children.

“Given the number of young and apprentice-age staff employed in day nurseries, these wage rate increases will potentially have a significant impact if these cost increases cannot be passed on through fee increases.

“While we saw a surge in transactional activity pre-budget, with operators looking to exit before any announcements that may affect the value of their business, many childcare providers that had been considering delaying exit plans while realising the benefit of the full funding rollout may now look to bring forward their plans due to increasing employment costs and tax reforms eradicating much of the benefit they would have been expecting to see over the next 12-18 months.”

Courteney Donaldson

Independent schools

Courteney Donaldson, managing director of childcare and education at Christie & Co, said that while the full impact of VAT introduction on enrolment levels will not be fully understood for some time, to introduce Business Rates from April 2025 will further squeeze private schools.

She added: “Many childcare providers that had considered delaying exit plans, while realising the benefit of the full funding rollout, may look to bring forward their plans.”

Higher and further education

The budget presented a mixed picture for the further education sector – while there are positive developments, questions remain about the adequacy of core funding compared to other education sectors.

David Hughes, chief executive of the Association of Colleges, said: “It was good to hear the Chancellor talk about the vital role further education has in the Government’s ambitions and aims.

“It was even better that in a very-tight budget she has announced £300m for further education, £40m from the growth and skills levy, and £950m for skills capital funding.

“These are a good start to turning round 14 years of severe cuts and under investment in colleges and they show that the Treasury recognises the need to invest more in FE colleges in order to deliver on the Government’s missions.

“It gives me hope that there will be a better, longer-term investment plan set out in the spring 2025 spending review to ensure that colleges can thrive and make an even bigger impact in coming years.”

Nathalie Jacoby-Danesh

On the higher education sector, Nathalie Jacoby-Danesh, partner at Browne Jacobson, said she expects increased collaboration between institutions moving forward, adding: “The budget lacks any express, meaningful financial support for higher education, such as direct support for struggling institutions, an inflationary rise in tuition fees, or explicit mention of reducing the research funding gap.

“It remains to be seen how any funding envelopes on core research, innovation clusters, further education, and the growth and skills levy may assist universities to balance the books.

“It is clear that institutions must continue their drive to maximise their own assets.

“Success in commercialising research rests upon the development of an innovation lifecycle strategy that is aligned with research strengths, ensures intellectual property is effectively recorded and protected, while keeping an open mind on the best routes to monetising knowledge.

“We also expect closer collaborations between institutions to take place, ranging from shared services to formal mergers.

“We would anticipate institutions to collaborate increasingly in large metropolitan areas or regions across the tertiary sector, or along subject specialism lines.”

Lifting children from poverty

Andrews concludes: “In spring, we will see the results of the Government’s spending review, which will set budgets for at least three years.

“Over the course of the spending review period, falling pupil rolls present an opportunity to consider how school funding is allocated.

“The Department for Education could increase per pupil funding without increasing spending overall.

“It should target additional support towards disadvantaged pupils, particularly the most disadvantaged, to help tackle the growing disadvantage gap – equivalent to 19 months of learning by the time pupils sit their GCSEs.

“We will be setting out proposals for how this could be achieved shortly.

“As ever, we also recognise that schools alone cannot fix the inequalities that have risen as a result of austerity and a global pandemic.

“The newly-formed cross-government Child Poverty Taskforce must adopt policies that lift children out of poverty, provide them with safe and warm housing, give them better access to health care, particularly mental health care, and support their families at the earliest-possible opportunity.”

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