Tony Foot, director of the department’s education funding group, told heads and school business managers this week that he was “under no illusion” about the financial difficulties schools would face because of a combination of real terms budget cuts and rising costs.

Speaking at a school funding conference in London, Mr Foot said that although schools fared better than many other parts of the public sector in Chancellor George Osborne’s spending review in November, they would face a difficult few years.

“I’m under no illusion, in all of the conferences I go to and the colleagues that I talk to, that the next few years are going to be highly challenging for the system,” he said.  

Mr Foot told headteachers: “The schools budget is protected in real terms. There’s a lot of nuance around what that really means in practice.

“So to be very clear, it means the core DSG [dedicated schools grant] and the pupil premium as a total pot are protected in real terms, as is the cash amount per pupil in the DSG as a whole and the cash rates within the pupil premium.

“It doesn’t mean real terms protection per pupil, and it doesn’t mean protection for all elements of schools funding,” he said, adding that the Education Services Grant - which is handed to academies to cover the cost of services that would otherwise be provided by local authorities - would be “phased out”, saving £600m.

Per-pupil funding would fall in real terms to “lower than the system has been used to over many years”, he said, adding that on top of this, “[cost] pressures on the schools budget are clearly running at a pretty high level”.

“All of those together clearly mean the context for schools over the coming few years is going to be a challenging one and we need to be planning now very actively in order to meet it,” he said.

Mary Bousted, general secretary of the ATL teachers’ union, said that Mr Foot’s comments were a “refreshingly frank admission that schools are going to find the next few years extremely difficult.”

“When rising costs are taken into account, schools’ real terms budgets are falling,” she said. “That’s happening at the same time as rising pupil numbers and problems with teacher supply. These various things will come to a fever pitch.”

Research by the Association of School and College Leaders, published last year, found that almost 90 per cent of 1,000 school leaders said financial pressures would have a “detrimental effect” on their schools. More than half said they had already been forced to reduce the number of courses on offer and to increase class sizes.

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