Autumn Budget 2025: impact on educational estate maintenance and upgrades

Background:

The Annual report on education spending in England: 2024–25 was published on 8 January 2025 by researchers at the Institute for Fiscal Studies (IFS). The report concluded that the 2.8% cash-terms growth in mainstream school funding per pupil in England in 2025-26 will not be sufficient to cover the expected increase in school costs, currently predicted to be around 3.6%.

As such there are fears that capital spending will be less than expected moving forward, leading to plans for improvements to the estate being pared back at a time when backlog maintenance and other costs are growing.

Funding Available and Autumn Budget Analysis:

For 2024-25, government plans still imply spending of about £6.1bn, matching previous plans and in the Autumn Budget 2024, the Government set out education capital spending plans of £6.5bn for 2025-26. From this amount, the Government has committed £300m funding to maintain and improve Further Education estates and there is around £3.8bn allocated to cover school and college rebuilding projects, the costs of addressing RAAC, as well as any other capital plans.

Even with recent funding increases, the IFS estimates that college funding per student aged 16-18 in 2025 will still be about 11% below 2010 levels, and about 23% lower for school sixth forms. About 37% of colleges were operating deficits at the latest count (2022–23). Meanwhile the number of young people in colleges and sixth forms is expected to grow by 5% or over 60,000 between 2024-2028.

Analysis has found that the Government would need to increase annual funding by £200m in 2027-28 in today’s prices to maintain spending per student in real terms.

Increasing tuition fees in line with inflation will provide only slight reprieve for university finances after more than a decade of cash-terms freezes as international student numbers are likely to have fallen in 2024-25 and the rise in employer national insurance contributions will increase staff costs from April 2025. Unlike schools and colleges, universities are not being compensated for this increase.

Speaking to Education Property following the release of the report, Julie McCulloch, director of policy at the Association of School and College Leaders, said: “This report reveals the reality that is facing many schools and colleges – yet another round of cutbacks. Schools and colleges have been expected to absorb relentless financial pressures over the past 15 years, and they have done an incredible job in minimising the impact on students. But we cannot go on like this. It is death by a thousand cuts. The Government must recognise the importance of improved investment in education.”

Issues with Funding Available:

The report shows that total capital spending on education in England was about £6.3bn in 2023–24. About £1.8bn was devoted to school maintenance and repair, £900m was spent on free schools, and £900m was spent on rebuilding further education colleges, with about £2.7bn on new schools and other aspects of capital spending.

Interestingly, though, the actual level of capital spending seems to be about £900m less than previous plans from a year ago and this is likely to reflect the significant delays in the school rebuilding programme. Money for these delayed projects will either need to come out of allocations from 2024-5 onwards, or the plans will need to be scaled back.

The big question is whether spending is meeting current needs. The National Audit Office reported that the Department for Education calculated it needed about £5bn per year from 2021 to 2025 in order to maintain school buildings and mitigate the most serious risks. This was based on a survey of the condition of school buildings. It instead requested about £4bn per year based on the rate at which it could increase spending. HM Treasury allocated about £3bn per year. As a result, actual funding allocations from government have been more than 40% below government-assessed levels of need. For 2025–26, school maintenance spending is due to be about £2.1bn, which is about 13% higher than in 2024-25, but still about the same level in real terms as the average over the past decade.

This strongly suggests that school maintenance spending remains well below government-assessed levels of need and spending on school buildings is relatively low in historical terms and when compared with levels of need for maintenance and repair.

Based on the analysis of the National Audit Office and Department for Education, there is a strong case for increasing spending on school buildings.

School Maintenance Issues

The National Audit Office has also released new figures which show the cost of addressing backlog maintenance in government-owned buildings stands at more than £49bn, with schools particularly affected by ongoing underinvestment. And this figure could be much greater as poor government data means the true cost cannot be confirmed.

The report claims the poor condition of the education estate is due to a number of factors:

·         Historic underinvestment

·         Cost increases and inflationary pressures

·         Many aged buildings which are reaching the end of their intended operational life at the same time

And it makes a number of recommendations for addressing the crisis, including a more-long-term approach to capital funding and improved data collection.

Having good-quality property that is properly maintained, utilised, and adaptable to future needs is fundamental to delivering public services. However, the condition of government property has declined over the last decade and the Government will need to consider the optimal way to manage its assets alongside its long-term investment plans, in addition to the cost of ongoing maintenance, to bring property condition to a satisfactory level.

What educational bodies can to do help with issues:

In the Autumn Budget 2024, the Government chose to top-up capital spending allocations for future years, particularly 2025-26. However, total capital spending across departments is only expected to rise by 3% in real terms in 2026-27 and is due to be frozen in real terms in 2027-28. This suggests little scope for further significant increases in property maintenance spending over the next two-year spending review period.

Given wider pressures on public spending, it is important to make effective decisions on prioritisation. This involves deciding which works to carry out and which to forego or postpone; whether to maintain existing properties, refurbish, or build new ones; and whether to divert funds allocated to maintenance to other areas of spending.

Higher Education institutions will need to look to partner more with developers and investors to deliver capital projects which go beyond just student housing to consider alternative delivery models for core assets, and how universities can deliver their estate strategies in an agile and resilient way against a continued backdrop of funding constraints. There has been a growing trend of HE institutions taking space, principally on leasehold basis; which may start to be seen more actively across the UK.

Alongside, or in addition to, seeking more partnerships, universities may look to ‘right-size’ their estates and dispose of spaces which are now surplus to requirements, given the establishment of hybrid working and new teaching methods. Ultimately, this may mean a greater number of universities selling assets or land. Without these steps into the relative unknown, it is difficult to see any light on the horizon for HE institutions, with the outlook for effective estates funding in the short and medium term for schools and FE colleges also being doubtful.