Budget 2025: what schools need to know
Chancellor Rachel Reeves’ Budget sparks warnings about a real-terms drop in school funding but includes spending on school libraries and books. Here are all the key details for the sector.
Planned changes to the special educational needs and disabilities (SEND) budget could result in a real-terms cut in per-pupil funding for mainstream schools, according to official forecasts.
Delivering the Budget today, chancellor Rachel Reeves announced £5 million for books in secondary schools, and repeated a previous commitment of £10 million to ensure that every primary school has a library.
She also announced a plan to lift the two-child cap on child benefit – a measure that teaching unions have long called for.
However, there are concerns over another plan set out in the Budget, to bring the cost of SEND provision into the central government spending envelope from 2028-29.
This could result in per-pupil funding for mainstream schools falling, according to a report from the Office for Budget Responsibility (OBR), which was published in error before Ms Reeves’ Budget announcement.
The OBR says the government has not set out any specific plans on how this additional cost, which it estimates at £6 billion in 2028-29, would be covered.
The report adds that, if this £6 billion for SEND provision were fully funded within the DfE’s £69 billion core schools budget in 2028-29, this would imply a 4.9 per cent real fall in mainstream school spending per pupil – rather than the 0.5 per cent increase planned by government. However, the DfE says this is inaccurate.
Annual growth to the DfE budget from 2025-26 to 2028-29 will be -0.1 per cent in real terms, taking inflation into account, the OBR report adds.
Today’s Budget followed warnings, revealed in Tes, that schools face a drop in per-pupil funding of up to 4 per cent in 2026-27 in real terms under figures released last week.
Here are the key details for schools from the 2025 Autumn Budget:
Secondary school books
The chancellor confirmed that every secondary school in England will receive £1,400 to purchase new library books, after the announcement was trailed in national media last weekend.
This £5 million investment is targeted at getting more children reading for pleasure and is part of the government’s aim to make 2026 the “National Year of Reading”.
Primary school libraries
Ms Reeves promised in October to provide a library in every primary school in England by 2029, and the government has committed £10 million to create libraries in the 1,700 primaries across the country that it says are lacking one.
Lifting the two-child benefit cap
Ms Reeves confirmed the government will scrap the two-child benefit cap from April 2026.
This is a limit that restricts the child tax credit and universal credit to the first two children in most households.
This change will come at an estimated cost of £3 billion by 2029-30, according to the OBR.
In an open letter to prime minister Sir Keir Starmer in September, the NEU teaching union, the NAHT school leaders’ union, the Association of School and College Leaders, the NASUWT teaching union, Unison and the National Governance Association said it was “critical” to get rid of the two-child cap.
Warning on SEND deficits
The cost of SEND support will shift entirely on to central government from 2028 under a plan outlined today – but the OBR warns that the DfE has no plan for how to pay for it.
The Budget states: “The government would not expect local authorities to need to fund future special educational needs costs from general funds, once the statutory override ends at the end of 2027-28.”
The move will add £6.3 billion to the DfE’s spending in the first year alone, rising towards £9 billion by 2030-31, according to the OBR.
The OBR report also warns that the statutory override, which currently keeps councils’ SEND spending deficits off their books, is due to expire in 2028. The overall deficit is estimated to reach £14 billion.
The Budget document points to the fact that SEND plans are subject to reforms due to be set out in the new year. It says future funding implications will be managed within “overall government” spending.
Councils have been legally allowed to ignore the SEND deficits in their accounts due to the statutory override. But the OBR says it only “masks” the SEND funding crisis.
It adds that many local authorities would “likely be unable to meet their balanced budget requirement” and says the government has not set out how this risk will be managed.
Natalie Perera, chief executive of the Education Policy Institute, said the government must not cut school funding to alleviate SEND pressures.
“Further cuts to per-pupil funding risk widening inequalities and compromising schools’ ability to deliver a world-class education, particularly for disadvantaged and vulnerable pupils,” she said.
A DfE spokesperson said the OBR’s estimations were “incorrect”.
“We are clear that any deficit will be absorbed within the overall government budget. These projections also do not account for the much-needed SEND reforms this government will bring forward,” they said.
VAT on private schools
The government’s introduction of VAT on private school fees will raise £40 million a year more than expected, the OBR also states.
Estimates for the number of children expected to leave the private school system in the long term as a result of the policy are unchanged – at 35,000 pupils or 6 per cent of the private school population, the report says.
School finances in a ‘perilous state’
Education unions have welcomed the government’s pledge to scrap the two-child benefit cap. But the NEU warned that it could ballot its members on strike action in response to the Budget.
Daniel Kebede, the union’s general secretary, said “education is running on empty”, and “today’s Budget has done nothing to improve this”.
Pepe Di’Iasio, general secretary of the ASCL, said: “It is deeply disappointing that there was nothing in the Budget speech which recognised or addressed the huge financial pressures on schools and colleges.”
He added that the government’s decision to bring SEND funding into the DfE’s central budget will “clearly have a catastrophic impact on educational provision, and it is imperative that the government sets out how it intends to address this issue as a matter of urgency”.
Paul Whiteman, general secretary of the NAHT, said that “this wasn’t a Budget focused on public spending, and school finances remain in a perilous state”.
He added: “If this government really wants to make its mark on education, it must use some of the income raised in today’s Budget to ensure all schools have the resources they need.”
Fears over per-pupil funding
The national funding formula (NFF) for 2026-27 was published last week, stating that the minimum per-pupil funding levels will increase to £5,115 for primary pupils and £6,640 for those in secondary schools.
However, Simon Oxenham, national lead on school finance and efficiency at the Institute of School Business Leadership, warned this could amount to a 3.5 per cent to 4 per cent decrease in real terms.
His analysis of the NFF shows that almost all of the increase is the result of the Department for Education rolling the Schools Budget Support Grant and National Insurance Contributions Grant into core funding, rather than an uplift to schools’ budgets.
Once those grants are removed, the real increase to minimum per-pupil funding levels is just 0.02 per cent, according to Mr Oxenham. The uplift applied across most other NFF factors is 2.11 per cent.
In last year’s Autumn Budget the government announced that core school funding would increase by £2.3 billion a year, including an extra £1 billion for special educational needs and disabilities.
Jabed Ahmed