Real-terms increases in per pupil funding over the remainder of the decade could still result in cuts to school budgets, due to significant falls in pupil numbers, reveals the Education Policy Institute (EPI).

Under a scenario where per pupil funding is increased by 0.5% in real terms each year, total school funding would fall by £1bn between 2024-25 to 2029-30, a new EPI funding model has predicted.

London and the North East are projected to experience the largest falls in funding, across both primary and secondary phases.

And primary schools are set to be the hardest hit, with total funding projected to fall by 5.6% between 2023-24 and 2029-30.

Over the same time period, total funding for secondary schools will increase until 2026-27, before it also begins to fall.

The analysis has revealed the significant impact that projected falls in pupil numbers could have on school funding across England, showing the challenges that these demographic changes will present to the financial health of schools.

The report is the first to use EPI’s new school funding model, which replicates the Department for Education’s own national funding formula (NFF) and allows researchers to analyse the impact of potential funding policy decisions on individual schools and areas of the country.

Using this model, researchers project that overall funding for primary and secondary maintained schools will fall to £41.6bn by 2029/30, down from a peak of £42.7bn in 2024/25, even if pupil-led per-pupil funding is increased in real terms.

And, as the overall schools budget for all of the projection period is not yet known, the EPI uses a central estimate of a 0.5% real terms increase in pupil-led per-pupil funding, per year.

With the projected changes to pupil numbers varying throughout the country, the report also examines how school funding will be impacted across different geographic areas.

Falling pupil rolls are one of the key challenges facing any government over the next decade.

And, with over half of all schools now academies, local authorities are in a difficult position of being responsible for place planning, but unable to direct academies to adjust their admissions numbers.

Key findings in the report show:

• Total pupil numbers in state-funded primary and secondary schools are projected to fall from a peak of 7.57 million in 2022-23, and then decrease at an average rate of 1% each year until they reach 7.14 million in 2028-29
• This means that even under a scenario where per-pupil funding is increased by 0.5% per year, overall funding would still fall by £1bn by 2029-2030. Total funding would peak in 2024-25 at £42.7bn, but would then decrease by a yearly average of 0.5% until 2029-30, where it would fall to £41.6bn – 2.6% lower than its peak in 2024-25
• Primary funding will be overtaken by secondary funding in 2026-27. In 2023-24, total funding for primary schools was 5.9% higher than total funding for secondary schools. Primary funding will decrease until it is overtaken by secondary funding in 2026-27, when both funding totals begin a downward trend. By 2029-30, secondary funding will be 1.2% higher than primary funding
• All regions will experience a decrease in primary school funding between 2023-24 and 2029-30, with the North East projected the largest decrease of 9%. The East of England is projected the smallest decrease with just a 1.2% drop in funding
• In secondary schools, all regions with the exceptions of Yorkshire and the Humber, the North East, and London are projected to experience an increase in funding between 2023-24 and 2029-30. The East of England is projected the largest increase at 4.9%
• For local authorities, Lambeth is projected the largest decrease in funding with 21.2% at primary and 15.7% at secondary. The largest increase in funding between 2023-24 and 2029-30 is projected to occur in Central Bedfordshire with a rise of 13.1% primary and 17.8% at secondary
• If changes in pupil numbers in parliamentary constituencies are consistent with those in their constituent local authorities, the largest drop in funding is projected in Streatham, decreasing by 21.3% at primary and 15.8% at secondary. South West Bedfordshire is projected the largest increase, 13.4% at primary and 17.8% at secondary
• If decreases in funding due to falling pupil numbers were ‘reinvested’ and funding was maintained at peak levels of 2024-25, funding could be increased by a further £148 for primary pupils, and £164 for secondary pupils by 2030

In future work, EPI plans to investigate how funding could be weighted more heavily towards schools with greater numbers of disadvantaged pupils, to help tackle the widening attainments gaps that these pupils face.

Robbie Cruikshanks, researcher at the EPI, said: “The scale of change projected in the pupil population presents major policy challenges to future governments.

“Most school funding is allocated on a per-pupil basis. As a result, falling pupil numbers can mean lower budgets for schools while not lowering costs in the same way, given these are largely fixed.

“Managing this fall in pupil numbers means that, in many areas of the country, the number of pupils that are admitted to schools will inevitably fall. This could then lead to mergers to ensure that schools remain financially viable or even school closures.

“One of the key challenges facing the system is that pupil place planning remains the responsibility of local authorities, but ultimately they have no statutory levers to direct academies to adjust admissions numbers.

“Policymakers must carefully consider the impacts of changes to the national funding formula on schools that are most affected by falling pupil numbers and how best to redistribute any savings created by these falls.”