Spending Review: Sunshine or Rain for Education?

The Spending Review tomorrow [n.b. 11th June 2025] sets out government spending priorities for the next three years. Based on the work of our excellent colleagues at the Institute for Fiscal Studies, who recently produced a detailed report on the choices facing Rachel Reeves, here’s the LEI education spending “weather forecast” for 2025-2029.

Overall

£94bn

🌦️

Education is second only to Health as the biggest chunk of government spending, at £94 billion.

But with a sluggish economy and political priority going to the NHS and defence spending, the forecast is for cloud and rain, with only a few sunny intervals. From a lifelong education perspective, the obvious problem is that since the DfE spends 87% of its budget on compulsory education there’s little left to subsidise any form of adult learning.

Early Years

£8bn

☀️

Early Years education has by far the sunniest outlook. Few would argue with this priority, in the face of the overwhelming evidence about the positive impact on children – particularly from disadvantaged backgrounds – of access to good quality pre-school education.

Schools

£65bn

⛅️

Taking up 70% of the DfE budget, the school sector is likely to be protected from direct cuts, but is still facing some big resource challenges, so it’s going to be an unsettled three years. Rising costs (mainly on staff), and the relentless rise in expenditure on special educational needs, mean that even if spending per pupil is protected in the period up to 2028/29, it will still amount to a 3% cut in real terms. On top of that, the shrinking number of births – particularly in areas like London – will make many primary schools unviable, forcing closures which should help with savings but are politically difficult to manage.

FE & Sixth Form 16-19

£8.8bn

⛅️

Funding for 16-19 year olds is already set to increase in 2025/26, but even maintaining spending at current levels in real terms won’t be enough, for two key reasons. First, the crisis in staff recruitment, with average FE lecturer pay now £7,000 a year less – 18% lower – than school teachers. When you add in the rising costs of staffing, a large slice of any additional funding will need to be spent on improving pay. Secondly, the growth in 16-18 year olds, up 230,000 since 2018, is set to continue, with an extra 110,000 expected until the numbers peak in 2028. The DfE is already increasing funding to cope with these additional numbers, but absorbing them in practice is not an easy task given constraints on space and the challenge of finding extra teachers to teach them.

Apprenticeships

£3.1bn

💨

Although it has recently benefitted from an 8.5% increase in the DfE budget, there are stormy times ahead for apprenticeship funding, with the winds of change blowing strongly. Unless there is an increase to the levy (which would go down like a lead balloon with employers) there will be a continuing move away from higher level apprenticeships for adults towards a focus on younger people. There may well be further restrictions on degree apprenticeships to enable this re-prioritisation, for example, by requiring trainees to cover all or part of their tuition costs via a student loan, in line with traditional degree students.

Adult Education

£1.5bn

☔️

The sad history of dwindling Adult Education Budgets is set to continue. With Adult Skills funding already subject to a cut of 7% in 2025/26, Strategic Local Authorities with responsibility for adult skills will be receiving less in cash terms and will have to be innovative and imaginative to stretch their resources to meet the needs. There are possible silver linings in potential extra funding related to the DWP’s “Get Britain Working” initiative and the recently announced 32% increase in the immigration skills charge to employers, but the current outlook is for continued rain and cold.

Higher Education

£2.2bn

☔️

Unlike all other DfE spending lines, the £2.2 billion directly spent on HE (mainly on high-cost subjects and student support) is only a fraction of the total cost, with student loans being accounted for in a completely separate Treasury process. The weather for the HE sector over the next three years is going to be predominantly overcast. Any rise in the tuition fee cap is likely to be tied to stringent commitments around widening access and improving outcomes for disadvantaged students. With the government sending a clear message to “get your own financial house in order”, any increases in funding are vanishingly unlikely and instead there may well be further cuts to research and other direct funding.

The only ray of light is the Lifelong Learning Entitlement, which clicks in from 2026/27, but it will take time and investment to build up the demand for this and it won’t provide a significant short-term boost to income. In short, HE can expect little comfort if any from the Spending Review, leaving a lot riding on the success of UUK’s “Transformation and Efficiency” Taskforce, so it will be timely to get an insider update on its progress from Prof. Dame Sally Mapstone at our 26th June event. 

For an expert assessment of the Education elements of the Spending Review we’re very fortunate to have top fiscal guru and Director of the IfS Paul Johnson delivering our annual lecture on 2nd July. No-one is better placed to provide a longer-term view of the funding issues around education over the next period, and the policy challenges we all face.