Government funding to cover increased employer national insurance contributions (NICs) could fall up to 35 per cent short for some schools, a headteachers’ union has warned.
The Association of School and College Leaders has heard from its members that Department for Education funding to cover increased NICs will leave some schools facing a shortfall of “around 10 to 35 per cent”.
Julia Harnden, funding specialist at ASCL, said: “We are still in the process of gathering feedback from members about the adequacy of the rates for the national insurance contributions grant, but early indications suggest shortfalls ranging from around 10 to 35 per cent.
“This represents large sums of money that schools must now account for and only adds to the financial pressure that they are already under. We need to understand how representative these shortfalls are across the system.”
‘Difficult to get a clear picture’
Leora Cruddas, CEO of the Confederation of School Trusts, has said that some trusts are reporting shortfalls of up to 20 per cent.
She said: “Both the changes to national insurance and the funding formula for schools are complicated, and together with some gaps in information for early years and post-16, it is difficult to get a clear picture of the impact.
“Based on what we know so far, however, some trusts are reporting shortfalls up to 20 per cent of the increased costs on employer national insurance contributions, and this will add to already severe cost pressures being faced by the sector.”
David Clayton, chief executive of Endeavour Learning Trust, which runs eight schools in the North West, told Tes the funding announced to cover increased NICs was welcome but, for many trusts, falls short of the actual costs faced.
He added: “Coupled with the latest DfE technical note, which highlights the limited headroom in school budgets, it’s clear that schools are being asked to find efficiencies where none realistically remain.
“Schools have spent years identifying savings and have still improved standards despite having fewer resources. However, the reality now is that all the fat has already been trimmed. Any further squeeze will inevitably affect school provision, and it’s the most vulnerable and disadvantaged children who will feel this most acutely.”
Meanwhile, Caroline Barlow, headteacher at Heathfield Community College and co-chair of the Headteachers’ Roundtable, said the headroom in schools is not spread equally, with many rural schools being at the lower end of the funding distribution while tackling higher costs.
The DfE methodology to calculate funding for grants often does not take account of schools like Heathfield, where 80 per cent of staff are on the upper pay scale and therefore result in higher staff costs, she added.
“Every year we’re constantly trying to make decisions about efficiency. We did have reasonable reserve but that is whittled away. It’s getting much harder to balance the budget,” Ms Barlow told Tes.
Most ‘challenging’ forecasts in two decades
Benedicte Yue, chief financial officer at River Learning Trust, said the trust estimates the DfE funding will cover about 80 per cent of their increased NICs, with a £400,000 shortfall.
She said: “A lot of my colleagues are reporting the funding covering less.
“For next year, the sector is looking at one of the most challenging forecasts in probably the past two decades. The numbers don’t add up and that’s in a context where almost a third of trusts are now holding reserves at less than 5 per cent of their income.”
Sarah Findlay-Cobb, CEO of Landau Forte Charitable Trust, said the trust’s funding allocations for 2025-26 equate to a funding increase of around 0.5 per cent.
She said: “The NICs alone have a £500,000 impact on the budget. The calculator currently shows that we will get approximately 70 per cent of this through the grant.”
NICs increase from 1 April 2025. However, grants will be paid in September for local authorities and in October for academies.
Ms Findlay-Cobb warned this gap “will be unmanageable with current cash flow constraints” for some trusts.
Special school funding ‘under huge pressure’
Warren Carratt, CEO of Nexus MAT, which has 17 special schools in South Yorkshire and the East Midlands, warned NICs funding for special schools is calculated based on the number of planned places, and therefore schools that employ more staff where they have pupils with complex needs “might have a significant shortfall”.
“This also does nothing to compensate all schools for the increase in contracted services, such as cleaning, catering and private therapies, which will then be passed on,” he added.
The DfE’s technical note on budget headroom excludes high-needs providers from its modelling, as well as early years providers and sixth forms, as it states their cost pressures are “quite different in nature”. It adds it will review whether the note should be extended in future.
Simon Knight, joint headteacher at special school Frank Wise School in Oxfordshire, said the government does “not know what level of affordability exists in the specialist sector, but they are still expecting us to foot the bill, placing yet more pressure on a sector that is struggling under the government’s systemic neglect”.
Higher national insurance costs for schools
Schools and high-needs settings will receive more than £930 million in funding for increased employers’ NICs next year, the DfE announced yesterday.
The DfE has also announced that there will be £25 million for schools with early years provision and £155 million for post-16 schools and academies and further education colleges.
Several people in the sector noted yesterday that the funding does not cover increased costs that schools are likely to face when suppliers raise their prices to cope with their own increased employer NICs.
The DfE also said in a technical note yesterday that the “headroom” in school budgets in 2025-26 would only cover a teacher pay rise of 1.3 per cent. The government has recommended a teacher pay rise of 2.8 per cent.
It suggested that schools could generate £550 million in headroom nationally by finding a 1 per cent efficiency in their budgets. This £550 million would cover a 1.7 per cent staff pay rise, the department said.
A DfE spokesperson said: “The government recognises the challenges individual schools are facing, but the dire fiscal situation we inherited means that tough decisions are needed across the public sector - including schools.
“We will continue to look at how we can do more to support leaders to use funding as efficiently as possible, while continuing to deliver better life chances for children and young people across the country.”
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