Sharp drop in pupil numbers could lead to schools losing £1 billion in funding

Real term funding increases during the rest of this decade could still lead to cuts in school budgets due to ‘significant’ falls in the number of children in both primary and secondary schools in England, which the EPI said is one of the key challenges facing any government over the next decade.

Funding in schools in England is allocated on a per pupil basis, which means that without changes to the way schools are funding, many will see a drop in the amount of funding they receive, which the EPI warns could lead to schools merging or closing completely.

The EPI report highlights that as pupil numbers fall, ‘many schools will see their budgets contract as a result’, but that reductions in class sizes do not lead to the same proportional decreases in staffing costs, school supplies, energy bills, and the other day-to-day costs of running a school.

‘Faced with this challenge, some of the most severely affected schools will struggle to stay viable,’ it says.

‘As these schools feel the squeeze, they will be forced to consider alternatives: mergers with other schools, difficult cost-cutting measures, and ultimately school closures.’

The EPI said that even if per pupil funding rises by 0.5 per cent in real terms each year, total school funding would fall by £1 billion between 2024-25 to 2029-30.

Total funding would peak in 2024-25 at £42.7 billion but would then decrease by a yearly average of 0.5 per cent until 2029-30, where it would fall to £41.6 billion – 

London and the North East are projected to experience the largest falls in funding in schools.

Robbie Cruikshanks, researcher at the Education Policy Institute (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 whilst 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.’

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) 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 £41.6 billion by 2029/30, 2.6 per cent lower than its peak of £42.7 billion in 2024-25 – even if pupil-led per-pupil funding is increased in real terms.

With over half of all schools now academies, the EPI said that local authorities are in a difficult position of being responsible for planning the number of school places, but unable to direct academies to adjust their admissions numbers.  

Cruikshanks  added, ‘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.’  

Paul Whiteman, general secretary of the largest school leaders’ union NAHT, said, ‘Schools are already strapped for cash – and even with a dip in pupil numbers, any further cuts to funding would be a catastrophe for our children. Instead, the drop in pupil numbers provides the government with an opportunity – by maintaining current funding levels, schools could keep current staffing levels, paving the way for smaller class sizes, and targeted support for pupils.

‘In places where there is a more significant short-term drop in numbers, such as London and the northeast, we urge the government to take a pragmatic, long-term view. It would be a waste to allow smaller schools to close, only for there to be a need for more places in those areas further down the line.’

Bridget Phillipson MP, Labour's Shadow Education Secretary, said, ‘With schools still reeling from fourteen years of Tory neglect, the choice at the next election is clear.

‘Just as the last Labour government invested in education, so too will Labour under Keir Starmer, with our plans to put more expert teachers in classrooms, a mental health counsellor in every secondary school and free breakfast clubs in every primary school paid for by ending private schools' tax breaks and getting rid of tax loopholes for the super-rich.’

• Download School funding model: Effect of falling school rolls