The latest Spring Budget shows a relatively unchanged financial landscape with little change to public spending levels.

Despite the spotlight on safety concerns surrounding the school estate, following school closures over Reinforced Autoclaved Aerated Concrete (RAAC), budget documents reveal a reduction in this year’s capital spending.

This analysis by our Head of Insight at Surveyors to Education (S2e) looks at the implications of the budget for education, highlighting the challenges posed by unchanged departmental spending, with a focus on capital investment.

The headlines from the Spring budget 2024

The Chancellor of the Exchequer, Jeremy Hunt, presented his Spring budget to Parliament on the 6th March.

Following the announcement, the economic outlook remains broadly the same as presented in the autumn statement with the Office for Budget Responsibility (OBR) stating ‘the medium-term economic outlook remains challenging’. Interest rates and inflation have improved slightly but departmental spending remains tight after 2025.

The most notable change announced in the budget was another 2p cut to national insurance contributions, following an initial 2p cut in November 2023. Estimated to cost £10.5bn a year, this reduction in national insurance is funded by targeted tax rises planned in later years and a decrease in the government’s fiscal headroom against its fiscal rules (to have debt falling by the end of the forecasted spending period in 28/29).

While departmental spending plans remained broadly unchanged, the NHS, which had been facing a real-terms cut to its 24/25 budget, received an additional £2.5 billion so that spending remains broadly flat. The forecast beyond 2025 implies no real growth in departmental spending per person in the next five years, with resource spending planned to grow in real terms by 1% per year and capital budgets are fixed in cash terms.

There are no detailed departmental spending plans beyond the current Spending Review period, which ends in 24/25, so it is unclear what the implications are for each department. Paul Johnson, Director of the Institute of Fiscal Studies (IFS), suggests the tight spending plans indicates ‘pressure on funding across the board and signals more cuts on unprotected spending areas.’

What was announced for education?

£105 million of funding for a wave of 15 new special free schools, in locations to be announced in May, to create over 2,000 additional places for children with special education needs. This announcement forms part of a wider £4.2 billion in capital spending to improve productivity of the public sector via the Public Sector Productivity Programme.

The NHS is expected to receive most of the funding focused on productivity with £3.4 billion to invest in technological and digital transformation. It is billed to be a ‘blueprint for other parts of the public sector to adopt’ and relevant departments will be expected to develop detailed productivity plans to inform the next Spending Review (detailed spending by department from 2025).’ Details of how this will affect the education sector are unclear, but the £4.2 billion capital spending is not expected to be available until 25/26, despite lack of visibility on the rest of departmental spending.

The Chancellor also provided some updates to existing announcements including confirmation of the locations of 20 Alternative Provision free schools, which are part of a £2.6bn capital investment announced in the 2021 Spending Review to increase much needed capacity for high needs provision. Hourly rates for providers delivering the 30 hours of childcare provision for children aged nine months to four years announced in the Spring budget 2023 were also confirmed.

What else did the Spring budget reveal?

In a year where the school estate has been in the spotlight following the closure of school with presence of RAAC, capital spending appears to have been revised down from £7bn forecasted for 23/24 in the spring budget last year, to £6.3bn and will be reduced further to £6.1bn in 24/25. This is despite the fact that, according to the National Audit Office (NAO), 38% of the school estate is believed to be past its initial design life and a significant safety risk across the school estate has been recognised by the Department for Education (DfE).

Since 2010 there has been a large drop in school capital funding and according to the NAO, there is a disconnect between how much funding the DfE thinks it needs and the funding provided by the treasury. Despite this year’s budget focusing on public sector productivity, the DfE believe that current funding levels mean ‘responsible bodies may delay carrying out remedial work, leading to poor longer-term value for money’.

As it stands, with capital budgets fixed in cash terms from 2025 onwards and subject to inflationary pressures, funding available to maintain school estates is currently likely to continue to be squeezed. In our previous discussion on the autumn statement, we highlighted that capital spending had already seen the impacts of rising inflation demonstrated by the reduction of successful academies in last year’s Condition Improvement Fund (CIF). Indeed, the approach to CIF clearly articulates the current funding situation facing the school estate, as funding is only allocated to the schools demonstrating the most urgent need. The uptake of this suggests that 20% of state funded schools (those eligible for CIF) will only receive capital funding, at the point of urgent need, rather than to take preventative measures.

While the DfE judges that there is insufficient capital funding available and that the most effective further mitigation to improve the school estate would be an expanded School Rebuilding Programme, this is clearly not forthcoming within current spending plans.

Looking ahead

Both main political parties have signalled the importance of education with the prime minster calling it ‘the closest thing we have to a silver bullet’ and Labour including it as one of their five missions to ‘Break down barriers to opportunity.’ With the tight budgets currently planned by the government from 2025 and Labour committed to follow them, the funding available to help to tackle some of the challenges faced by the sector is unclear. Indeed, some of the tax measures announced by the Chancellor, including to the reforming of non-domicile regime and extending tax on windfall profits of energy companies, had been earmarked by Labour to fund key educational policies should they win the General Election. This raises questions on how they will fund their existing policies, let alone raise funding to improve (and decarbonise!) the school estate.

We will be tracking policy and spending announcements as we approach the next general election. To receive our analysis and commentary please make sure you sign up to our email updates.

Chloe Pett, Head of Insight at S2e