Report (R126)

Long-run comparisons of spending per pupil across different stages of education

Date: 27 February 2017
Publisher: The IFS
DOI: 10.1920/re.ifs.2017.0126

Education spending is the second-largest element of public service spending in the UK behind health, representing about 4.5% of national income in 2015–16. The level of UK education spending has also risen significantly in real terms over time. Growth was particularly fast from the late 1990s through to the late 2000s, with real-terms growth averaging about 5% per year between 1998–99 and 2010–11. Education spending has since fallen in real terms as spending cuts began to take effect from 2010 onwards. Between 2010–11 and 2015–16, it has fallen by about 14% in real terms, taking it back to the same level it was in 2005–06 and a similar share of national income to that last seen through most of the 1990s.

Whilst important, trends in this headline measure of education spending beg further key questions. How is spending spread across different stages of education and how has this shifted over time? We know that policymakers have increasingly focused on the early years, that school spending has been prioritised both in years of spending increases and in years of cuts, and that there have been successive reforms to the higher education funding system. How have these reforms affected the balance of spending per pupil or student across different phases of education? These questions are a vital component of the education policy debate.

There have also been large increases in the numbers of pupils or students participating in non-compulsory stages of education (early years, further education (FE) and sixth forms, and higher education (HE)). Indeed, the number of children in pre-school education has risen by over 50% between 1997–98 and 2012–13, the number of students in higher education has risen by 40% and the number in 16–18 education has risen by 30%. Given the relative constancy in the number of pupils in state schools in England, these increases mainly represent higher levels of participation at these stages rather than increases in cohort size. Such increases in participation will have been driven by a combination of changing individual choices and government policy. To what extent have these increases in numbers of pupils or students affected spending per pupil or student at each phase of education?

In this report, we present long-run series of spending per student in England across the four main stages of education (early years, schools, further education and sixth forms, and higher education). This provides policymakers and the public with a much longer and more comprehensive picture of how spending per student has been evolving across different stages of education than has previously been available. We also discuss how changes in policy and growth in participation have affected the generosity of resources at each stage of education over time.

Throughout the report, we focus on current or day-to-day public spending on education in England. Capital spending is a much smaller share of education, relatively volatile and focused mostly on the school sector. We focus on England primarily for data availability reasons and on pupils or students aged between 3 and 21 because attributing spending to individual pupils outside these ages becomes increasingly hard. We refer to spending per child in pre-school education for children aged 3 or 4, spending per pupil for children aged 5–16 and spending per student for young people aged over 16. This follows standard naming conventions at each stage.

Our definition of spending is given at the start of each chapter, with appendices going into further detail. In some cases, our measures of spending per pupil or student are calculated as total spending divided by the total number of pupils or students. In other cases, our calculations represent ‘bottom-up’ estimates of spending per pupil or student based on micro-data for schools and students in higher education.
The rest of this report is set out as follows: early years (Chapter 2); schools (Chapter 3); further education and sixth forms (Chapter 4); higher education (Chapter 5); and comparisons and conclusions (Chapter 6).


Executive Summary

Education spending is the second-largest area of public service spending in the UK, representing about 4.5% of national income in 2015–16.   Government spending on education grew by around 1.7% per year in real terms over the 1980s and 1990s, before increasing sharply over the 2000s by more than 5% per year in real terms. With the exception of 16–18 education spending, most areas of education have been protected from cuts since 2010–11.
We have created measures of spending per pupil in England across the four main stages of education stretching back to the early 1990s for the first time.   These series of day-to-day spending per pupil allow us to understand how policy changes have affected resources available to students in different stages of education over the long run.
Early years    
Government spending on early years education was around £1,700 per child in pre-school in 2015–16, less than half the level of spending in primary schools.   In the early 1990s, early years spending was less than £100 million in 2016–17 prices. By 2015–16, this had risen to about £2.3 billion. This large increase was the result of the introduction, and subsequent extension, of the entitlement to free part-time pre-school education for 3 and 4 year olds in the late 1990s. In addition, the government has extended this entitlement to disadvantaged 2 year olds, spending on which was about £520 million in 2015–16.
The total early years budget was about £5.4 billion (2016–17 prices) in 2015–16. This adds in subsidies for childcare and spending on services such as Sure Start.   Government expenditure on the childcare element of working tax credit, tax-free employer-provided childcare vouchers and Sure Start has grown rapidly from near zero in the mid 1990s to £3.3 billion combined in 2010–11 (2016–17 prices). However, since 2010–11, spending on Sure Start and support through working tax credit have each fallen by more than 30% in real terms.
Early years spending is set to increase by £1 billion over this parliament to fund the expansion of the early years entitlement to 30 hours per week.   It is not clear whether this additional funding will be sufficient to deliver a high-quality and extended level of provision. Over the last few years, spending by local authorities on the early years entitlement has fallen slightly in real terms and providers have consistently complained about ‘under-funding’.
Total spending on schools in England represented just under £37 billion (2016–17 prices) in 2015–16, accounting for 11.5% of total public service spending in England.   This represents £4,900 per pupil at primary school and £6,300 per pupil at secondary school. To better understand how the level of resources available to pupils has changed over time, we focus on these figures of primary and secondary school spending per pupil. This excludes spending by local authorities on central services, as well as spending by special schools.
Primary and secondary school spending per pupil have almost doubled in real terms between 1997–98 and 2015–16.   Primary school spending per pupil has increased by 114% in real terms and secondary school spending per pupil by 90%. This is the result of successive governments prioritising school spending, with per-pupil spending rising 5% per year in real terms during the 2000s and then being protected in real terms since spending cuts took effect from 2010.
Spending per pupil is expected to fall by 6.5% in real terms between 2015–16 and 2019–20.   This will be the first time schools have seen real-terms cuts in spending per pupil since the mid 1990s.
The introduction of the National Funding Formula in 2018–19 will represent the largest shake-up in school funding in England for at least 25 years.   This single national formula will replace the 152 different formulae currently used by local authorities to allocate funding to schools. This will lead to both winners and losers. Transitional protections, however, will mean that no school will see cuts of more than 3% by 2019–20 and no school will see an increase of more than 5.6%.
Further education and sixth forms    
Total spending on 16–18 education in England was about £6 billion in 2015–16.   Of this, about £3.7 billion was allocated to further education and sixth form colleges and £2.2 billion to school sixth forms.
16–18 education has been the big loser from education spending changes over the last 25 years.   In 1990–91, spending per student in further education was nearly 50% higher than spending per student in secondary schools, but in 2015–16 it was 10% lower, at around £5,600 per student. Spending on further education fell faster during the 1990s, grew more slowly in the 2000s, and has been the only major area of education spending to see cuts since 2010.
Spending per student in 16–18 education is set to fall further between 2015–16 and 2019–20, leaving spending per student at a similar level in real terms to that 30 years previously.   By comparison, total public spending is currently expected to be 93% higher in 2020 than in 1990, and national income 77% higher. This long-run, and continuing, squeeze in resources in 16–18 education poses significant challenges for the sector as a whole.
Higher education    
Up-front government spending on undergraduate education was £9.7 billion for 2015–16 entrants, but the expected long-run cost is only £3.7 billion.   Up-front government spending includes teaching grants provided to universities and the total value of tuition fees (but excludes maintenance loans and research grants). The difference between up-front spending and long-run cost is due to the expected repayment of student loans by graduates.
The level of resources available per student starting university in 2015 was £28,000, over 50% higher in real terms than in 1990.   Despite this large overall increase, higher education funding has been highly erratic. There have been real-terms falls in resources provided to universities in 18 of the past 26 years, offset by large increases in tuition fees in 1998, 2006 and 2012.
Over the last 30 years, higher education in England has shifted from being entirely funded through teaching grants to being almost entirely funded through tuition fees.   In 1990, higher education was entirely funded though publicly-funded teaching grants. Today, they account for only 9% of funding. The remaining 91% comes from graduate contributions through repaid tuition fee loans (51%) and public subsidies to these loans (40%). These figures are based solely on tuition fee loans and so differ from published estimates of the ‘RAB charge’.
In 2017–18, some universities will be allowed to increase fees in line with inflation.   The introduction of the Teaching Excellence Framework will allow universities to increase fees in line with inflation in 2017–18 if they meet certain teaching quality requirements. This will partly correct the historical pattern of real-terms falls in resources across most years. However, the exact framework for the implementation of this increase in future years is still to be determined.
The removal of the cap on student numbers may pose a risk to government finances.   Removing the cap was expected to increase student numbers by 20%, which would increase total government expenditure on higher education considerably, particularly if the additional students are less likely to pay off their tuition fee loans.