Around 1,000 schools could face a 7 per cent budget cut after 2019-20 - over and above the real-terms funding losses they are being hit with over the next three years - economists have warned.

A report published today by the Institute for Fiscal Studies (IFS) calls on the government to reduce the “uncertainty” over what will happen when a £300 million pot of transitional funding - aimed at protecting schools set to lose out under the national funding formula - runs out in April 2020. 

Under the proposed formula, no school can lose more than 3 per cent of cash per pupil between 2017-18 and 2019-20, and none can gain more than 5.6 per cent. As a result, only 60 per cent of schools will receive the exact level of funding dictated by the formula in 2019-20, the IFS report says.

But the government’s consultation on the formula, which closes today, does not set out when these transitional measures will end.

Removing the transitional funding in full would result in 5,500 schools experiencing an average cut of 4.5 per cent in cash terms, and 1,000 schools losing 7 per cent, although the report acknowledges it “seems unlikely” that this will happen overnight. 

Funding cuts will hit deprived pupils hardest

The warning came as three teaching unions - the NUT, NAHT and ATL - today wrote to prime minister Theresa May calling for the government to provide extra money and saying that the £3 billion of cuts required by schools will lead to redundancies, bigger classes, fewer subjects being offered and less support for vulnerable children.

Small secondaries and schools with high numbers of the most deprived pupils will be hit hardest when the transitional funding ends, the IFS analysis suggests.

The IFS report says the government’s failure to provide any guidance on how long the 3 per cent “floor” or the 5.6 per cent “ceiling” would last is “a major source of uncertainty for affected schools and could cause schools to make inefficient decisions if they are faced with the prospect of having to make further, unexpected cuts after 2019-20”.

Chris Belfield, co-author of the report, said the lack of guidance was “a big omission…The formula could imply around 1,000 schools would face a further 7 per cent cut to their budgets in the next parliament.”

Preserving the annual 1.5 per cent “floor” beyond March 2020 would result in most schools reaching their intended formula level by 2029-30, the research found.

This would provide a smoother transition in the event that overall school spending grows in real-terms after 2020, avoiding a “roller-coaster path of school funding with large cash-terms cuts immediately followed by increases”, the report says.

Call to incorporate pupil premium

The IFS also wants to see the pupil premium rolled into the formula. The report says: “The continued existence of the pupil premium as a separate grant makes very little sense”, despite the government’s rationale that schools are held to account for pupil premium money.

It would be more “logical” to hold schools to account for how pupils from different backgrounds perform more generally, and how resources are used to support their attainment, “rather than for just one element of funding for one group of pupils”, the report says.

The IFS has also queried whether the formula will achieve its aim of protecting the most disadvantaged pupils. The report says: “The introduction of the IFS  was designed to largely preserve the existing level of total funding targeted at disadvantaged pupils. However…this is not quite the case.”

In the most deprived primary schools, funding per pupil is expected to grow by only 0.3 per cent in cash terms between 2017-18 and 2019-20 as a result of the formula, compared with 0.8 per cent across all primaries.

In the most deprived secondary schools, spending is set to fall by 0.2 per cent, compared with an average gain of 0.7 per cent across all secondaries.

This is because “the reform diverts funding away from schools with the most deprived student populations and towards those with average levels of deprivation”, the IFS says.

‘Protected’ budgets

Schools are already set to see their funding fall in real-terms by 8 per cent by 2019-20, taking into account inflation, salary costs and the loss of the £600 million a year Education Services Grant.

A DfE spokesperson said: “The government has protected the core schools budget in real terms since 2010, with school funding at its highest level on record at more than £40 billion in 2016-17 - and that is set to rise, as pupil numbers rise over the next two years, to £42 billion by 2019-20.

“But the system for distributing that funding across the country is unfair, opaque and outdated. We are going to end the historic post code lottery in school funding and under the proposed national schools funding formula, more than half of England’s schools will receive a cash boost.

“We have been consulting schools, governors, local authorities and parents to make sure we get this formula right, so that every pound of the investment we make in education has the greatest impact.

“We recognise that schools are facing cost pressures, which is why we will continue to provide support to help them use their funding in cost effective ways, including improving the way they buy goods and services.”

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