Plugging £3.7bn education gap would cost penny on income tax
PLUGGING A £3.7bn shortfall in school funding would cost the equivalent of a one per cent increase on basic income tax, according to an expert.
Luke Sibieta of the Institute for Fiscal Studies (IFS) warns in a new blog that any pledge to protect budgets will not be cheap, and political parties need to be clear about how any such promise would be funded.
If this pledge is unaffordable, then politicians must be upfront with schools about the financial pressures they will face in the next few years. IFS researchers have estimated that it would cost £2bn to protect per-pupil spending between 2017/18 and 2021/22 – a five per cent increase to the total schools budget, Mr Sibieta said.
If a government wanted to compensate for schools for the extra costs they have faced over two years, the National Audit Office has estimated that this would cost at least an extra £1.7bn, he added.
This brings the total to £3.7bn, or a 10 per cent rise in the schools budget.
To cover the gap in funding, basic income tax would need to rise from 20 per cent to 21 per cent, Mr Sibieta said. “Protecting schools from real-terms cuts would therefore require significant additional public spending: £3.7bn is the equivalent of 1p (in the pound) on the basic rate of income tax or three per cent of the NHS budget in England.”
The Government has also been consulting on a new national funding formula for schools, which is designed to make funding fairer. But these reforms would still produce winners and losers, Mr Sibieta said, adding that in a tight funding climate, schools that are the biggest losers would see a real-terms cut of 10 per cent in their budgets between 2015/16 and 2019/20.
He said preventing any realterms cuts from a new funding formula would cost the public purse even more.
“This does not mean we should necessarily abandon reform of the school funding system, particularly as delaying it will just make it harder to implement further down the line,” he says. “It does, however, imply a need for openness about the kind of losses some schools are likely to face, and why they are thought necessary.
“In summary, a promise to protect schools from cuts will not come cheap.
“If any of the political parties promise to protect schools from cuts, they should be clear about exactly what they mean and how such a promise would be funded.
“If such a commitment is not thought to be affordable, politicians should instead be upfront with schools about the cost challenges they are likely to face in the coming years.”
The IFS, a respected economic think-tank, has previously said that schools in England are dealing with their first real-terms cuts to per-pupil spending since the mid-1990s, calculating that spending is falling by 6.5 per cent between 2015/16 and 2019/20, after inflation is taken into account.
This rises to eight per cent if additional costs faced by schools, such as hikes in pension contributions and National Insurance, are included.
Labour has said there would be no rises in National Insurance contributions (NICs) or VAT over the next five years for anyone earning less than £80,000.