Schools told to pay 'half' of teacher pay rise

Leaders are challenging the government’s assumption that schools can cover half of next year’s 3.5 per cent teacher pay rise from existing budgets.

The Department for Education announced yesterday that teachers will receive a 3.5 per cent pay rise in 2026-27, followed by a 3 per cent increase from September 2027.

Schools will get £700 million in additional funding in 2026-27 towards the cost of the first pay award.

This £700 million would cover the first 1.7 per cent of the pay rise, according to a DfE breakdown seen by Tes.

As the DfE set out yesterday, schools will be expected to cover a further 1 per cent through savings and “maximising value” from existing budgets.

However, the remaining 0.8 per cent is also to be met from existing school budgets, through what the DfE describes as “financial headroom”.

This means that, although the DfE says schools will need to find only 1 per cent through savings, the total amount to be met from existing school budgets is closer to 1.8 per cent.

DfE insists schools can afford pay rise

The DfE has insisted that schools should be able to manage the cost of the pay rise when additional funding, existing funding and savings are combined.

However, Sir Dan Moynihan, chief executive of The Harris Federation, said there is an assumption from the DfE that schools have spare money in their budgets to use.

“That is a total unfunded cost of 1.8 per cent - or, put another way, schools are funding 51 per cent of the rise,” he added.

Sir Dan also criticised the timing of the announcement, saying schools were finding out “just a couple of weeks before the end of term” despite being promised earlier information on pay this year.

School costs

A DfE schools cost analysis says mainstream school funding is expected to rise by 1.9 per cent in 2026-27, while costs - excluding future pay awards - are expected to rise by 1.4 per cent.

This would leave around 0.5 per cent of overall budget headroom, equivalent to around £250 million nationally.

The note also says each 1 per cent pay increase for all staff would cost around £330 million in 2026-27.

This means the £250 million of assumed headroom covers around 0.8 percentage points of staff pay costs.

Owen Jenkins, CEO of Broad Horizons Education Trust and a former director of funding at the Education and Skills Funding Agency, said the DfE’s headline claim of 1 per cent does not “tell the full story”.

“At a time when schools are already preparing to implement a significant programme of new expectations from the DfE, while continuing to manage wider financial pressures, it is reasonable to question whether there is genuinely a further 0.8 per cent of ‘affordability’ left within school budgets,” Mr Jenkins said.

Concerns over allocations

The government claims schools should have enough money to cover the overall cost of the pay award, and the exact allocations to schools will be published next week.

However, the national average calculation may not reflect the financial position of individual schools.

Mr Jenkins said the “real test” will be how the extra funding is allocated.

DfE funding has historically been distributed using a national workforce model that “doesn’t always reflect the actual staffing profile of individual schools”, he said.

Trusts that have worked to retain experienced teachers can have higher salary costs than the model assumes, meaning they may receive less funding towards their actual pay costs, he warned.

This “feels difficult to reconcile” with the government’s ambition to improve teacher retention, Mr Jenkins said.

He added: “Until we see how the allocations work in practice, we won’t truly know how much schools are genuinely expected to fund. However, I fear for many it will be higher than 1.8 per cent.”

Inflation fears

UK inflation was 2.8 per cent, as of the latest figures covering the year to May.

But the Bank of England said in April that UK inflation could peak at 3.6 or 3.7 per cent by the end of this year, and could reach 6 per cent next year in the worst-case scenario. Predictions of inflation have been made more difficult by the uncertainty caused by the conflict between the US and Iran.

The Institute for Fiscal Studies said despite above-inflation teacher pay increases in recent years, salary levels for most teachers will still be about 7 per cent lower in real terms in 2027-28 than they were in 2010-11.

Sir Dan warned that the teacher pay settlement will be difficult for schools to finance, particularly if broader inflationary pressures push up their costs.