Schools appear to be one of the relative winners in last month’s Budget seeing further investment in breakfast clubs and an additional £2.3 billion towards the core school budgets to support Labour’s manifesto pledge to recruit 6,500 teachers.

With £1 billion of this increase going to deliver much needed funding for Special Educational Needs and Disabilities (SEND) and Alternative Provision and £300 million for the historically neglected Further Education (FE) sector, much of the post budget commentary on education assesses the relative impact of these changes on core spending. Meanwhile, increases to school and FE capital funding are rarely interrogated with as much rigour.

In the following analysis we seek to change this, looking at the announcements made for capital funding, the context of spending committed and consider what this could mean for the future.

Overall takeaways:

1. The Chancellor is passionate about the school estate: Rachel Reeves attributed her own experience of poor school buildings as a motivating factor for her political career and places a clear importance in improving the school estate. A supportive Chancellor can only be seen as a positive when tough decisions on future spending priorities are being decided.

2. Next year’s overall DfE capital investment is set to increase by 19% in real terms to £6.7 billion: An increase in funding in phase one of the spending review is a welcome announcement, however capital investment in the remainder of this Parliament is less certain. For context, the increase next year follows a 12% decrease in DfE capital funding this year (24/25), declining from £6.2bn in 23/24 to £5.5bn. Nevertheless, when comparing to overall recent levels of capital available to the DfE, year 25/26 will be significantly more than recent averages. An Institute of Fiscal Studies (IFS) report on school buildings in 2023 found that a three-year average up to 2023-24 (excluding FE) was around £5.2 billion.

3. There are few changes to how capital is being distributed up to March 2026: While the government have introduced initiatives such the School-Based Nursery Capital Grant, most of the capital funding is supporting existing programmes or funding streams. They are proceeding with the School Rebuilding Programme (SRP), launched under the previous government, along with the existing system for maintenance allocation at this stage. We can only guess whether future spending plans will reveal more radical approaches to the school estate, however the DfE have indicated they will be reviewing maintenance funding from 2026.

Details of the breakdown in capital spending:

£1.4 billion for the School Rebuilding Programme, an increase of £550 million vs this year:

Spending plans for the SRP were not easy to find under the previous administration, so this more transparent approach is a welcome one.

The SRP was announced in 2020, with the ambition of rebuilding 50 schools per year from 2021, 500 schools in total. By February 2024, all places on the programme were taken, with the final 100 spaces going to schools identified with Reinforced Autoclaved Aerated Concrete (RAAC). The intention of this programme was to rebuild the schools with highest condition need. Over 300 of the schools on the programme were allocated following a self-selecting application process. In 2023 the National Audit Office (NAO) reported that many of the schools considered in the worst condition by the surveys collected by the DfE, did not apply to the SRP which indicates there are still many schools in need of significant upgrade that have not been factored into current DfE costings.  

The Chancellor also confirmed plans for 100 SRP projects to start delivery across England next year, following large delays in the programme initially reported by the NAO. Two schools selected in December 2022 for the fourth set of the SRP were named checked by Rachel Reeves in the budget, and it will be interesting to see when these construction contracts are awarded, given the programme is due to run up to 2030 and has faced significant delays so far.

It is worth noting that the SRP is the only central government fund for rebuilding schools and there is currently little indication of expanding the programme, leaving questions around what will happen to schools in need of rebuilding that are currently not on the list. The government have inherited an ageing school estate, 38% of school buildings are beyond initial life design (NAO, 2023), which has unknown structural liabilities in some of its building types. The DfE is finally undertaking research into a particular set of system-builds to better understand the extent of the structural problems they present. Once the research is complete, perhaps we will get a better understanding of appetite and need for further rebuilding programmes.

£2.1 billion to improve school maintenance next year, an increase of £300 million:

Maintenance funding saw a big revision under the previous government, following the cancellation of the Building Schools for the Future (BSF) programme. There was a move away from large building programmes towards a more proactive maintenance approach, fixing the small problems before they become big expensive ones. Maintenance funding for individual schools was reduced, to allow larger pots of money to be given to Responsible Bodies who in theory would manage their large school estates strategically. Arguably this approach was undermined by insufficient funding levels which has resulted, in some cases, in only the most urgent building repairs and a continuing deterioration of the school estate. The new government have suggested they intend to continue to prioritise maintenance over rebuilding, which is arguably unsurprising given the situation facing public finances.  

School maintenance funding is distributed by the School Condition Allocation (SCA). According to DfE figures, for the past four years total SCA has been relatively flat at around £1.8 billion. Hence an additional £300 million brings the total to £2.1 billion. It is not the first time that school maintenance has received additional funding. In 22/23 an additional £447 million was made available, £560 million in 20/21 and £402 million in 18/19. While these injections of funding are welcome, once spread amongst either individual schools through Devolved Formula Capital (DFC) or by increasing SCA allocations to Responsible Bodies, and the amount available for the Condition Improvement Fund (CIF), its impact may not be as significant as the headline figures suggest. It will be interesting to see how this additional £300 million will be distributed when the SCA for 25/26 are announced, usually in Spring, next year.

£950 million for skills capital:

There are fewer details on what this pot of money will be spent on. A third of the budget, £300 million, will go towards supporting colleges to maintain, improve and ensure the suitability of their estate. This is not surprising given that over 200 FE establishments were reclassified into the public sector in November 2022, after a decade of being classified in the private sector. This meant they could no longer borrow commercially to fund capital projects and would rely on the government for capital spending. After receiving initial capital allocations up to 2023/24, the previous government had made no further capital available to the sector, suggesting this new support was overdue and is likely to need to be repeated in further spending reviews.

At this stage, it seems unclear what the remaining £650 million will support. The previous government committed to £2.8 billion of FE capital support up to 24/25. While the streams funded through this investment are still listed on the FE capital funding page, such as the FE capital transformation fund and T-Levels Capital Fund, the majority are closed or no longer available, and most funds are likely to have already been allocated.

Given the importance the new government places on improving skills with the formation of Skills England and the pledge to break down barriers to opportunity, the FE sector has a key role to play, and we will watch with interest to understand the capital consequences of these promises.

£15 million for the School-Based Nursery Capital Grant: This is the first stage of Labour’s commitment to create 3,000 new or expanded nurseries. The expansion of School Based Nurseries will play a key role in delivering the commitment, allowing surplus school space to be utilised as pupil numbers decline. We can anticipate further capital investment going into future spending reviews, as the government seeks to make learnings from this initial phase of delivery.

What’s missing from this budget?

The previous government had promised to deliver a roadmap to decarbonise the school estate this autumn and had suggested it would be seeking to secure an injection of funding from the treasury for decarbonisation from 2025. Whether the previous administration had really believed in its ability to secure this funding is another question, however, the fact remains that capital support at the levels required to make significant progress in decarbonisation is missing. The Public Sector Decarbonisation Scheme continues to receive support in the budget, but it is very difficult for schools to secure funding from the scheme given the age and structure of the school estate. Many of the buildings are thermally inefficient and need upgrading before solutions like heat pumps will be funded through the scheme. As such, the question remains: how are we going to meet the target of reducing emissions from public sector buildings by 75% by 2037 unless meaningful investment is made available?

Final takeaway

From a capital perspective the Budget is a positive commitment to the education sector and an encouraging first step. Given the scale of the school estate and the number of challenges it presents, the current investment levels and continuation of the same approach will not be sufficient to secure the long-term decarbonisation and improvement of the school and FE estate. As Sam Freedman wrote in the Times Educational Supplement: “most of this money is just filling holes left by the last government” which “would be fine if the purpose of this Budget was to steady things before embarking on the process of more comprehensive improvements.” For core spending he is less optimistic for much additional investment but hints that there could be further opportunity for capital investment.

Moderately boosting investment levels on existing approaches gives the DfE time to evaluate which areas of the system need reform. The previous government’s record, safety of school buildings mentioned three years running as a critical risk in the DfE annual report, demonstrates what happens if structural issues are not identified and dealt with and maintenance is not funded sufficiently. A proactive maintenance approach which looks to refurbish and retrofit to improve energy efficiency is a sensible solution, but it will be undermined by lack of investment and imagination. For further clarity, we will all have to wait for the conclusion of the DfE’s review and to further announcements in phase two of the spending review next year.

For more information on how Surveyors to Education can assist you in your analysis and planning, please get in touch on 0116 5070130 or email enquire@s2e.org.uk.