Analysing the impact of the UK’s education funding reforms

The latest education funding announcements bring a mixed bag of opportunities and challenges for schools, parents, and students across the UK, however, questions arise about their sufficiency, implementation, and potential unintended consequences.

From VAT on private school fees to employer national insurance hikes, the ripple effects of these policies could reshape the educational landscape in the years to come. This article examines the key aspects of the announcements, and their potential impacts on education stakeholders.

Triple investment in breakfast clubs

Over £30million in investment for breakfast clubs will be welcomed by parents and teachers alike, alleviating the pressure on those from lower socio-economic backgrounds and improving outcomes for students.

However, there is, so far, no guidance available on how this will be implemented and this investment may apply further pressure on school staffing resources if existing teachers are required to start earlier than their contracted hours. This could increase costs for schools by way of varying terms of employment for teachers and/or increased costs in terms of salary for additional hours.

£1bn investment in special educational needs and disabilities

The significant investment in funding for pupils with special educational needs and disabilities is welcome; however, the perception within the sector is that it does not go far enough, and as local authorities will have discretion on how they spend the additional funding, there is concern that the vast majority may be used by councils to reduce their existing deficits which is estimated to be in the region of £4.6billion per annum. There is also concern within the sector that a complete overhaul of the SEND system is needed before visible improvement takes place as it is no longer fit for purpose.

Increase of £2.3bn to the core school budget to hire more teachers in key subjects

This announcement will hopefully address some of the staffing issues that schools have been facing, with recent Department for Education statistics published in May 2024 highlighting that recruitment targets were missed in 10 subjects in 2022/2023.

However, after considering the £1bn investment in SEND, as well as the £450million needed to fund the cost of this year’s teacher pay rise, only £850million of this funding will remain for other cost pressures. The Department for Education has said the remaining funding will be used to increase the mainstream schools’ National Funding Formula, the pupil premium and other elements of core funding.

£6.7bn capital investment allocated for the department for education, including £1.4bn to rebuild schools

£1.4bn of this capital has been allocated to the school rebuilding programme in 2025/2026 and following the issues at various schools following the discovery of Reinforced Autoclaved Aerated Concrete (“RAAC”), this announcement will go some way to alleviate the concerns surrounding potentially dangerous infrastructure. Guidance published by the previous Conservative government suggested that 234 schools out of over 22,000 had confirmed they had RAAC on their premises.

Whether this investment will go far enough remains to be seen, given the scale of the issue is somewhat unknown as more schools may come forward having identified RAAC issues with their buildings.

This funding also includes £2.1bn to improve the condition of school estates, alongside £300 million for maintenance.

VAT on private school fees and removal of business rate charitable tax relief

In the independent schools sector, the biggest announcement is that from 1 January 2025 private school fees will be taxable at the standard rate of VAT of 20%. This is expected to generate £1.8billion for the Treasury and increase the funding available for schools and teachers in the public sector. However, there are some concerns of additional pressure on the public sector if students are moved from fee-paying schools into state schools as a result of affordability concerns arising from the VAT charge. Whether and to what extent private schools will change their own fees as a result of VAT and how this will impact the sector is up for debate, however the government has estimated that 35,000 students will move to the state sector in the long term as a result of this policy, a figure which the Independent Schools Council believes has been underestimated. There are also considerable concerns within the independent sector that smaller independent schools will likely need to close as a result of this announcement. This decision is currently being challenged in court by the Independent Schools Council so watch this space.

From April 2025, charity-operated schools will also lose their charitable relief from business rates. With around 50% of private independent schools having charitable status, this will be expected to provide these schools with a further increase in tax liability. However, it is likely that this removal of relief will again help to raise funds required to support schooling in the public sector.

Employer national insurance hikes

Schools generally will also need to grapple with the increase in the rate of employer national insurance, from 13.8% to 15%, and the lowering of the threshold for employee earnings which national insurance now becomes payable, from £9,100 to £5,000.

However, the Treasury has confirmed that additional funding will be provided to public sector bodies such as schools to soften the impact of this increase.

The government’s education funding proposals mark a step towards addressing critical gaps in the UK’s schooling system, from improving accessibility for disadvantaged students to tackling infrastructure challenges. However, the scale of the issues raise questions about whether these measures can achieve the desired outcomes. Stakeholders must navigate these changes carefully, advocating for more detailed guidance and fair resource allocation to avoid exacerbating existing inequalities.

If you have any further queries about the announcements, or the impact, please do get in touch.