School Budgets Under Strain as Pay Review Suggests 4% Increase

The latest recommendation from the independent pay review body suggests a 4% pay raise for teachers in England this year — a figure that is significantly higher than what many schools had been planning for.

While rewarding teachers fairly is essential, the proposed increase risks putting additional pressure on already stretched school budgets — at a time when many have very little financial flexibility left.

Schools Were Planning for Lower Increases

In a recent survey that School Business Services conducted with 496 school and Trust leaders, as part of our Budget Assumptions webinar, the majority indicated they had been budgeting for lower pay increases:

• 67% were planning for the previously suggested 2.8% rise
• 26% were budgeting for a 3% increase
• Only 3% had planned for a 4% rise
• 3% were planning for just 1%
• 1% were preparing for increases of more than 4%

Clearly, few schools were expecting the recommended 4%, meaning many budgets will now be under significant strain.

Low Reserves Leave Schools with Limited Flexibility

In a separate poll:

• 40% of school leaders reported they are going into the 2025/26 academic year with less than 5% of their income held as reserves
• A further 38% said they would have just 5–10% in reserves

Such levels provide minimal resilience and leave schools vulnerable to financial shocks — especially those that require recurrent funding, such as a permanent increase in salary costs.

What Could Be Impacted if Schools Can't Afford the Pay Rise?

We also asked school leaders where they expect to explore savings to secure financial sustainability over the next year or two. The results show the stark reality facing many schools:

• 86% anticipate reducing staffing
• 70% expect to reduce spending on buildings
• 69% foresee cutting curriculum budgets
• 65% plan to cut ICT spending
• 54% are likely to reduce additional academic support
• 47% expect to reduce curriculum offers
• 47% expect to reduce pastoral support
• 32% foresee reducing support for vulnerable and disadvantaged pupils
• Only 1% said they would not need to take any action.

Additionally, 68% said they would tighten ICFP (Integrated Curriculum and Financial Planning) metrics, such as increasing class sizes or reducing non-contact time, and 9% are exploring implementation of the OpEx for Education framework.

The picture is clear: without extra funding to match the increased pay recommendations, schools will be forced to make unpopular and difficult decisions — including cutting staffing, scaling back curriculum opportunities, and reducing support for pupils.

Read our previous article on Achieving Efficiency Savings for Schools.

A Trust-Level Perspective

Benedicte Yue, Chief Financial Officer at River Learning Trust, contextualises the implications of the recommendation from a trust-wide perspective:

"With hardly any increase in funding per pupil, decreasing pupil numbers and spiralling SEND costs there is absolutely no room to absorb the recommended pay increase without extra cash. We can sadly no longer run state schools with state funding alone. In our trust, the 4% recommended pay rise would mean a further shortfall of approximately £10K on average in a primary school and £60K in a secondary school compared to the 2.8% recommended by the DfE last December, which was already hard enough to cover." - Benedicte Yue, Chief Financial Officer at River Learning Trust.

This statement illustrates the scale of the financial shortfall that schools may face, particularly when pay increases are not met with corresponding uplifts in core funding. The pressure is especially acute for schools managing increasing SEND demand and declining pupil rolls — factors that further erode economies of scale.

A Growing Financial Challenge for schools and Trusts

Schools want to reward their staff appropriately and play their part in securing the workforce of the future. But without sufficient funding to back up higher pay rises, it risks becoming a zero-sum game — where improvements in one area come at the cost of vital educational services elsewhere.

As schools await confirmation from the government on whether the pay review body’s recommendations will be accepted, many are already preparing for the implications. To safeguard educational provision and ensure decisions are evidence-based, it is essential that finance leaders have access to tools that offer comprehensive oversight of their budgets.

Now more than ever, having complete oversight of budgets and exploring all potential efficiency savings is critical. Tools like the SBS Financial Planner can help school leaders model different pay scenarios, identify pressures early, and make informed, strategic decisions to protect both staff and students in challenging times.

If you're concerned about how to navigate these budget challenges, we're here to help. Get in touch to explore how better oversight and smarter planning can support your school or trust through uncertain times.

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