Tag: #education

ICAEW chart of the week: Spending Review 2025

My chart for ICAEW this week looks at the government’s priorities as expressed through departmental budgetary allocations over the next three years.

A bar chart showing the average annual real-term percentage increase in departmental spending over the three years to 2028/29. Defence +3.8%. Security +3.7%. Business & Trade +3.0%. Health +2.7%. Local Government. +2.6% (central funding +1.1%, balance from local taxation). Justice +2.0%. Overall average increase +1.5%. Science +0.9%. Education +0.8%. Devolved administrations +0.7%. Energy & New Zero +0.7%. Home Office +0.5%. Cabinet Office +0.4%. DWP -0.2%. Transport -0.5%. Culture, Media & Sport -1.4%. HMRC -1.5%. Hm Treasury -1.9%. Agriculture & Rural Affairs -2.3%. Foreign & Development -8.3%. Asylum -13.1%. 13 Jun 2025. Chart by Martin Wheatcroft. Design by Sunday. Source: HM Treasury, 'Spending Review 2025'.

The Spending Review 2025 establishes base operating budgets for government departments for the three financial years from 1 April 2026 (2026/27, 2027/28 and 2028/29) and base capital budgets for four financial years (extending to 2029/30).

Departmental budgets for the current financial year ending on 31 March 2026 (2025/26), total £648bn and are expected to rise to £678bn in 2026/27, £697bn in 2027/28, and £717bn in 2028/29, an increase of 10.6% over the three years or 3.4% a year. This is equivalent to an average increase of 1.5% a year in real terms after adjusting for inflation of 1.9% a year on average over the spending review period.

The totals can be analysed between operating or ‘day-to-day’ budgets of £517bn, £536bn, £552bn and £568bn in 2025/26, 2026/27, 2027/28 and 2028/29 respectively and capital budgets of £131bn, £143bn, £145bn and £149bn. These are real terms increases of 1.2% and 2.4% a year on average over three years. 

The capital budget in 2029/30 is £152bn, a cut in real terms that reduces the average annual increase in capital budgets over four years to 1.8% a year on average.

My chart this week highlights how the 1.5% average annual real increase over three years in total budgets (operating and capital) has been allocated across departments, starting with the Ministry of Defence, which leads the pack with an average increase in its budget of 3.8% a year, followed closely by the security services, with an average annual increase of 3.7%. This reflects the elevation of national defence and security to the top of the government’s priorities since the general election last year, even though this increase will only move defence and security spending from 2.3% of GDP currently to 2.6% of GDP by 2027, a long way off the proposed 3.5% of GDP new minimum to be discussed at the NATO summit.

Economic growth and the NHS are the next highest priorities for the government and so it is perhaps unsurprising that the Department of Business & Trade does well with an annual average increase of 3.0%, closely followed by the Department of Health & Social Care, which receives 2.7%. The latter is the biggest increase in cash terms, at £31bn in total or about £12bn more in 2028/29 after adjusting for inflation.

Local government finances are in a parlous state and so the government has pencilled in a 2.6% average annual increase in core budgets for local authorities in England over the next three years. However, it is only increasing central funding by 1.1% a year on average, implying the balance will need to be made by local taxation, principally council tax.

The Ministry of Justice has been awarded 2.0% a year on average as the government seeks to tackle significant backlogs in the courts, overcrowded prisons and significantly under-resourced probation services.

The Department of Science, Innovation and Technology has received a below average annual increase of 0.9% over the next three years, but this follows an almost 12% increase over the past two years as the government has sought to increase investment in research and development to boost economic growth.

Despite being a key priority for the government, the Department for Education has only received a 0.8% average annual increase, partly because of falling primary school rolls in line with a significant fall in the birth rate over the last decade.

The devolved administrations – Scotland (0.8%), Wales (0.7%) and Northern Ireland (0.5%) – are budgeted to receive an average of 0.7% a year over three years as a consequence of the Barnett formula that links UK national government spending in England to the block grants provided to each devolved administration, adjusted for relative changes in population among other factors.

The Department for Energy Security and Net Zero is budgeted to receive 0.7% on average over three years, although this translates into an average annual increase of 2.7% a year once the UK government’s one-off (but long running) investment in the Sizewell C nuclear power plant is excluded. The latter peaks in the spending review period, but then starts to fall.

The Home Office is scheduled to receive a below average increase of 0.5% a year, although the government notes that core police operating budgets should go up by 1.7% once the contribution from local taxation is factored in. This increase also excludes spending on asylum seekers, a big item within the Home Office budget that is expected to fall by a real term average of 13.1% a year over three years as the backlog in asylum claims is tackled and lower cost alternatives to housing claimants in hotels are found.

The Cabinet Office is expected to receive just 0.4% on average reflecting the contribution that planned efficiency savings are expected to contribute to administrative budgets. This is also the reason for the 0.2% a year real-terms fall in the Department for Work and Pensions (DWP) budget as automation helps reduce the cost of administering the welfare system.

The budget of the Department for Transport is expected to fall by 0.5% a year overall, but this partly reflects a fall in spending on High Speed 2 as it comes closer to completion. If that is excluded, the department’s budget is expected to increase by 0.5% a year on average. The actual increase in spending should be even higher, as the budget is net of passenger revenues that are expected to grow at a faster rate over the next three years.

Extra money for housing was found within the spending review, but this wasn’t enough to stop the budget for the Department of Housing, Communities and Local Government from shrinking by an annual average of 0.6% a year as other activities are cut back, while the Department for Culture, Media & Sport (-1.4% a year on average) has also been asked to cut back its activities.

HMRC (-1.5% a year) and HM Treasury (-1.9% a year) see their budgets reduced significantly, with digitisation and efficiency savings expected to contribute significant sums.

The Department for Farming, Agriculture, and Rural Affairs (-2.3%) is also expected to see significant cuts over the next three years, as is the Foreign, Commonwealth and Development Office (-8.3%), although in the latter case that is principally driven by the decision to reduce overseas development assistance from 0.5% of GDP to 0.3% of GDP although some will come from back office savings.

Not shown in the chart are small and independent bodies and the government legal function, which are together expected to increase by 0.4% a year on average, although this comprise a -0.5% annual reduction in the former and a 5.3% average annual increase in the latter. The net changes after inflation are a fall of less than £0.1bn and an increase of just over £0.1bn respectively, which are rounding errors in the hundreds and hundreds of billions of pounds spent by government departments each year. 

Reading the Spending Review 2025 is a good way of understanding the current government’s priorities expressed in financial terms. A lot more money for defence and the NHS, substantial sums for business and the justice system, and significant cuts in international development, asylum handling, agriculture and administration costs. There’s some money for transport and housing, but that’s offset by savings from HS2 and other activities.

This chart was originally published by ICAEW.

ICAEW chart of the week: Schools out

Our chart looks at the projected state school population in England over the next six years, with an anticipated 10% fall in state nursery and primary school pupils implying school closures and mergers are on the way.

Schools out | ICAEW chart of the week | Dual column charts showing the projected number of pupils in England in thousands ('000) | Left hand chart: State nursery and primary schools | 2023 - 4,593 | 2024 - 4,510 | 2025 - 4,431 | 2026 - 4,350 | 2027 - 4,272 | 2028 - 4,181 | 2029 - 4,113 | Right hand chart: State secondary schools (excluding sixth forms) | 2023 - 3,193 | 2024 - 3,244 | 2025 - 3,244 | 2026 - 3,238 | 2027 - 3,219 | 2028 - 3,191 2029 - 3,145 | 30 May 2024. Chart by Martin Wheatcroft FCA. Design by Sunday. Source: Department for Education, 'National pupil projections'. Full-time equivalent pupils at start of academic year. © ICAEW 2024

According to Department for Education statistics, there were an estimated 8,425,000 school pupils under the age of 16 in England at the start of the current academic year in 2023. Of these, 4,593,000 were in maintained nursery and state primary schools, 3,193,000 were in state secondary schools, 131,000 were in state special schools, 13,000 were in alternative provision, and 496,000 were in independent and other non-maintained schools. 

Our chart this week shows how the first two categories are projected to change over the next six years, starting with a projected 10% fall in pupil numbers in state nursery and primary schools from 4,593,000 in the current academic year to 4,113,000 in the academic year starting in 2029.

Meanwhile the number of state secondary school pupils under the age of 16 at the start of the academic year is expected to increase from 3,193,000 in this academic year to peak at 3,244,000 next year before gradually declining to 3,146,000 in 2029, a fall of 3% from the peak.

Driven by a falling birthrate, the 10% projected fall in state nursery and primary school pupils is likely to be a major issue across England and a political hot potato for the next government. Larger primary schools may be able to cut the number of classes (ironically increasing class sizes) to mitigate reduced income from falling rolls, but this may not be enough. Smaller schools with just one class per year will find it more difficult to find savings. 

Closures and mergers are likely, as are a rise in ‘save our local school’ campaigns as academy trusts and local authorities seek to find savings in response.

The 3% decline from the peak in secondary school pupil numbers will also present major challenges, especially as the fall in numbers is unlikely to be spread evenly across all state secondaries. Some will see smaller falls or even rises in their school rolls, while others will see a much greater drop in their intakes. Again, reducing the number of classes in each year is a likely response for those affected, but some closures and mergers are almost inevitable.

These projections are subject to some uncertainty, despite the core numbers being based on children who have already been born that are likely to stay in the English education system for the entirety of their school careers. The level of migration is a key assumption and could lead to even lower pupil numbers if recently implemented restrictions on the eligibility of immigrants to bring dependents with them are effective. The projections also assume a relatively stable number of pupils going to private schools, which may need to be adjusted in the light of Labour’s proposals to add 20% VAT to school fees.

These statistics are prepared on a full-time equivalent basis, but these are deemed to be the same as total pupil numbers for each age group, apart from the under 5s. Many nursery pupils and primary school reception class students only attend on a part-time basis, with 974,000 under 5s converting into 874,000 full-time equivalents (FTEs) in the current academic year. These numbers exclude most under 5s who attend private nurseries, receive other forms of childcare, or stay at home.

In theory, falling school rolls should reduce pressures on the education budget while at the same potentially increasing per-pupil funding, depending on how much is cut from the school budget. However, with the Spending Review now scheduled for after the general election likely to result in upward revisions to the Spring Budget 2024 medium-term spending plans, any such savings are likely to be swallowed up.

ICAEW chart of the week: Receipts and spending by age

My chart this week looks at how receipts and spending vary by age, a key driver for public finances that new Chancellor Kwasi Kwarteng will need to factor into his fiscal plans.

Column chart - showing receipts by age group per person per month above the line and spending below the line. 0-9: £150 (receipts) - £550 (public services and interest), £290, (pensions and welfare), £270 (health and social care), £380 (education) 10-19: £210 - £620, £320, £110, £750 20-29: £1,150 - £440, £120, £160, £110 30-39: £1,930 - £430, £150, £180, £30 40-49: £2,200 - £430, £170, £200, £20 50-59: £1,960 - £450, £190, £300, £10 60-69: £1,240 - £480, £340, £370, - 70-79: £800 - £640, £1,170, £600, - 80+: £600 - £730, £1,400 - £1,270 Average: £1,220 - £510, £365, £310, £155

Kwasi Kwarteng’s first Budget will be an emergency one, not only setting out his plans for the financial year commencing on 1 April 2023, but also re-opening the budget for the current financial year. It will be dominated by the emergency support package for individuals and businesses already announced, alongside starting to deliver on Prime Minister Liz Truss’s commitments to cut taxes and ‘shrink the state’.

The new Chancellor is likely to find that cutting public spending is not going to be easy given the increasing financial commitments made by successive governments since the Second World War on education, pensions, health and social care, the areas that now dominate public spending. He supported adding to those commitments only a couple of years ago when then Prime Minister Boris Johnson decided to expand eligibility for social care, and former Chancellor Rishi Sunak re-committed to the ‘triple-lock’ that guarantees increases in the state pension every year.

As our chart this week illustrates, receipts and spending vary significantly across age groups, with spending on education higher on the young, who pay very little in taxes, and spending on pensions, health and social care much higher for older generations who contribute less than the average, especially after reaching retirement age. This contrasts with the profile for those of working age who pay the most into the system while on average taking the least out.

Derived from an analysis from the Office for Budget Responsibility’s fiscal risks and sustainability report published in July, the chart shows how – before the emergency Budget scheduled for 21 September – budgeted tax and other receipts for the current financial year 2022/23 are equivalent to £1,220 per person per month, based on forecast receipts of £988bn and a population of 67.5m. This is below budgeted public spending of £1,340 per person per month (£1,087bn/67.5m people/12 months), with the deficit of £120 per person per month (£99bn in total) funded by borrowing.

Average receipts per person per month by age group are estimated to be in the order of £150, £210, £1,150, £1,930, £2,200, £1,960, £1,240, £800 respectively for those aged 0-9, 10-19, 20-29, 30-39, 40-49, 50-59, 60-69, 70-79 and 80+ respectively. These numbers include £115 per person per month of non-tax receipts spread evenly across everyone. 

Spending on public services and interest in the order of £510 per person per month, or £550, £620, £440, £430, £430, £450, £480, £640, £730 by age group, is less variable across age groups because it much of this spending is incurred on behalf of everyone, including £125 in interest, £73 on defence and security and £53 on policing, justice and safety for example.

Spending on pensions and welfare of £365 per person per month is less evenly spread, with £290 and £320 per month spent on those in their first two decades and £440, £430, £430 and £450 on those in their twenties, thirties, forties and fifties respectively. This increases to average spending per person per month of £480, £640 and £730 on those in their sixties, seventies and eighties or over. 

Health and social care spending of £310 is biased towards older generations, with per person per month spending of £270, £110, £160, £180 and £200 for the first five decades of life contrasting with the £300, £370, £600 and £1,270 spent on average on those in their fifties, sixties, seventies and eighties or over. 

As you would expect, education spending of £155 per person per month on average is mostly spent on the young, with around £380 per person per month spent on the under-10s, £750 spent on those between 10 and 19, £110 spent on those in their twenties, and £30, £20 and £10 respectively spent on those in their thirties, forties and fifties.

The reason this chart is so critical is because demographics are not in a steady state, with the ONS projecting that there will be an additional 3.3m pensioners in 20 years’ time, a 27% increase. This will have significant cost implications for this and future governments over a period when the working-age population – who pay most of the taxes to fund public spending – is projected to grow by just 4% in total. 

While a declining birth rate might relieve some of the pressure on education spending over the next 20 years, spending on the state pension, the NHS and on social care will grow significantly if the commitments made by the current and previous governments to provide for income in retirement, universal free health care and an increasing level of social care provision are to be met, at the same time as running public services to the standard required.

Kwasi Kwarteng’s predecessors have been able to cover the expanding share of public spending going on pensions and health and social care without raising taxes above 40% of the economy by cutting spending on public services, in particular the defence budget, which has declined from in the order of 10% of GDP to around 2% over the last half century. However, with defence already at the NATO minimum, and many public services under significant pressure to improve delivery, there is much less scope to find savings than there has been in the past.

This poses a very big challenge for the Chancellor as he puts together his medium-term fiscal plans. Economic growth needs to be much higher than it has been in recent years, not only to cover the cost of tax cuts that he hopes will generate that growth, but also to generate the extra tax receipts needed to fund pensions and health and social care as more people live longer lives.

This chart was originally published by ICAEW.

ICAEW chart of the week: GCSE maths grade inflation

Our chart this week looks at the grade inflation challenge facing 16-year-olds across England as they study for their forthcoming GCSEs in the third year of the pandemic.

Chart showing GCSE results by grade for 2018, 2019, 2020 and 2021 respectively. 2018 – U (2.4%), grades 1-3 (5.4%, 8.8%, 12.7%), grades 4-6 (20.3%, 18.5%, 11.8%), grades 7-9 (9.5%, 6.9%, 3.7%) 2019 – U (2.3%), grades 1-3 (5.3%, 8.5%, 12.6%), grades 4-6 (21.1%, 18.2%, 11.4%), grades 7-9 (9.6%, 7.2%, 3.8%) 2020 – U (0.7%), grades 1-3 (4.0%, 7.3%, 11.1%), grades 4-6 (19.6%, 20.1%, 12.9%), grades 7-9 (11.0%, 7.9%, 5.4%) 2021 – U (1.1%), grades 1-3 (4.3%, 7.0%, 9.9%), grades 4-6 (18.7%, 20.3%, 12.7%), grades 7-9 (11.4%, 8.6%, 6.0%)

The ICAEW chart of the week is on the results of the General Certificate of General Education (GCSE) in mathematics for the past four years in England according to the Department for Education (DfE), illustrating how a burst of grade inflation in the pandemic poses challenges for both students and their examiners in the reinstated examinations this summer.

Maths is one of the core exam subjects taken by almost all 16-year-olds in England, with passes at grade 4 or above in both maths and English being a base requirement for most students wanting to progress onto GCSE Advanced (A level) courses and to university or a degree apprenticeship after that. It is also a prerequisite for many vocational qualifications, where good numeracy skills are often essential. 

The current grading system was adopted in 2017, with results now split into nine grades, which can be grouped into three categories of three grades each: below standard (1-3), good performance (4-6) and high performance (7-9). The four former grades of G, F, E and D were condensed into three (grades 1-3), while the old passing grade of C and the next level up of B were expanded to three, being 4 (pass), 5 (strong pass) and 6. The former high performance grades of A and A* were replaced by grades 7, 8 and 9, providing even more granularity at the top end.

The chart illustrates how before the pandemic the results in 2018 and 2019 were similar with 2.4% and 2.3% ungraded ‘U’ results respectively (which includes those who failed to turn up or who withdrew after entering), with respectively 26.9% and 26.4% of students receiving below standard grades (1-3), 50.6% and 50.7% received good performance grades (4-6), and 20.1% and 20.6% received high performance grades (7-9).

The debacle of the cancelled school examinations and regraded results in 2020, and the deliberate decision in 2021 to adopt teacher-assessed grades instead of exams, saw a significant rise in the number of higher grades awarded. There were fewer ungraded results (0.7% in 2020 and 1.1% in 2021), fewer below standard awards (22.4% and 21.2% respectively), more good performance grades (52.6% and 51.7%) and a great deal more high performance grades (24.3% and 26.0%). There was a big jump in the very top award, the so-called A**, with 6.0% of students receiving grade 9 in 2021 compared with 3.7% in 2018.

The percentage of each grade awarded by year were as follows:

2018 – U (2.4%), grades 1-3 (5.4%, 8.8%, 12.7%), grades 4-6 (20.3%, 18.5%, 11.8%), grades 7-9 (9.5%, 6.9%, 3.7%) – 535,312 entrants

2019 – U (2.3%), grades 1-3 (5.3%, 8.5%, 12.6%), grades 4-6 (21.1%, 18.2%, 11.4%), grades 7-9 (9.6%, 7.2%, 3.8%) – 554,598 entrants

2020 – U (0.7%), grades 1-3 (4.0%, 7.3%, 11.1%), grades 4-6 (19.6%, 20.1%, 12.9%), grades 7-9 (11.0%, 7.9%, 5.4%) – 571,624 entrants

2021 – U (1.1%), grades 1-3 (4.3%, 7.0%, 9.9%), grades 4-6 (18.7%, 20.3%, 12.7%), grades 7-9 (11.4%, 8.6%, 6.0%) – 584,933 entrants

The Office of Qualifications and Examinations Regulation (Ofqual), which regulates qualifications, examinations and assessments in England, has expressed a desire to return to a pre-pandemic grade profile but has acknowledged that the current cohort of GCSE students have experienced significant disruption to their education over the past two years. As a consequence, they believe it would be unfair to revert back to the previous level awards in one go and have said that they will set grade boundaries around the mid-point between the 2019 and 2021 results, subject to the normal process of moderation. 

This may seem unfair to students who can expect to be rewarded with less generous marks than their immediate predecessors given the difficulties being experienced in many schools over the past two years as they have studied for their GCSEs. There have been frequent closures and class disruptions as the coronavirus has and continues to propagate around the country. But Ofqual and the examiners are keen to avoid the grade inflation experienced over the last two years of teacher-assessed grades becoming embedded, a real prospect if they were to wait another year or two before attempting to bring grades back down towards pre-pandemic levels.

The experience of the last two years is that the ability of Ofqual and the DfE to deliver their plan will depend on events, so we will need to wait to see how well the process of sitting exams goes and how the results when they are announced are viewed by the court of public opinion.

In the meantime, we wish all the best of success to all those studying for their GCSEs this summer in England, as well as to their compatriots sitting equivalent exams in Wales, Scotland and Northern Ireland.

ICAEW chart of the week: School-age demographic change

This week’s chart illustrates how the number of 10 year-olds in the UK is expected to fall sharply over the rest of the decade, just as the number of 18 year-olds is expected to peak in 2030.

School-age children 10 year-olds 2022: 855,000 2023: 831,000 2024: 813,000  2025: 807,000 2026: 808,000 2027: 783,000 2028: 759,000 2029: 730,000 2030: 702,000 18 year-olds 2022: 741,000  2023: 752,000 2024: 781,000 2025: 797,000 2026: 824,000 2027: 817,000 2028: 826,000 2029: 841,000 2030: 855,000

The Office for National Statistics UK Population Estimate for July 2020 reports that there were 855,000 children in the cohort who will be 10 years old next year when most of them will be entering their final year of primary school. A falling birth rate since 2012 means that the numbers of 10-year-olds will fall by 18% over the following eight years to 702,000 in 2030, with a consequent drop in the number of primary school places that will be needed in the coming decade: 

  • 2022: 855,000 10 year-olds
  • 2023: 831,000
  • 2024: 813,000 
  • 2025: 807,000
  • 2026: 808,000
  • 2027: 783,000
  • 2028: 759,000
  • 2029: 730,000
  • 2030: 702,000

At the same time, the number of 18 year-olds will grow significantly reaching a peak in 2030 when that cohort of 855,000 will be 18, 15% more than the 741,000 of 18 year-olds in 2022. 

  • 2022: 741,000 18 year-olds 
  • 2023: 752,000
  • 2024: 781,000
  • 2025: 797,000
  • 2026: 824,000
  • 2027: 817,000
  • 2028: 826,000
  • 2029: 841,000
  • 2030: 855,000

The chart was prepared using the numbers of children estimated to be in the UK in 2020 adjusted for time growing up, but without adjustment for migration or the (fortunately) relatively small number of deaths that would be expected to occur over the course of the decade. 

Prior to Brexit and the pandemic, there was a net inflow of around 5,000 a year adding to each age group which, if repeated, would have the effect of reducing the rate of decline in 10 year-olds and increasing the size of the peak in 18 year-olds in 2030. However, with migration potentially having gone into reverse during the pandemic, it is unclear whether net immigration will be as high as it was before.

Either way, one of the first orders of business for new Education Secretary Nadhim Zahawi will be to review the plans to reduce primary school and expand secondary school provision over the next few years, as well as addressing the pressure there will be on universities, colleges and apprenticeships as the bulge of births in the mid-noughties flows through the education system over the coming decade.

This chart was originally published by ICAEW.

ICAEW chart of the week: Schools budget up £14bn, or is it £1.2bn?

English schools budget 2020-21 +£2.6bn, 2021-22 +£4.8bn, 2022-23 +£7.1bn

The Prime Minister’s announcement of a ‘£14bn package’ of more money was welcome news for English schools as they prepare to re-open their doors after the summer holidays.

Unfortunately, as is common with government announcements, there is a tendency to add several years together to give a bigger headline, exacerbated this time by the inclusion of inflation to make the headline even bigger! 

In reality the announcement is a lot less exciting, as illustrated by the #ICAEWchartoftheweek. The announced increase in the 5-16 schools’ budget in three years’ time of £7.1bn (from £45.1bn in 2019-20 to £52.2bn in 2022-23) turns out to be £3.6bn, or an average of £1.2bn a year after taking account of inflation and the expected growth in the number of school pupils of around 2% over that time.

This is still very good news for schools trying to manage within constrained budgets, but (as the IFS and others have reported) the increase will still be insufficient to restore real-terms per pupil funding to the levels seen before the financial crisis. A 12% increase in pupil numbers since 2009-10 has seen budgets squeezed as funding has been constrained to inflation-only increases for most of the last decade.

Ironically, the Chancellor wasn’t able to take advantage of the same trick in his announcement the following day of £400m for further education and sixth forms, despite the fact that this was proportionately a bigger increase. The announcement was only for one year, so he couldn’t add multiple years together to create a bigger headline, and HM Treasury no doubt held the line about not adding in inflation.

Either way, these announcements are indication of how the fiscal approach is changing after a decade of austerity and struggling public services. This week’s Spending Review will give us a few more clues about the direction of public spending, although if (as rumoured) the Budget is postponed then we may not find out what the plans for taxes and borrowing to fund these increases until the Spring.