Huge Government investment in schools - but how far will it stretch?

A £1.4 billion package to rebuild crumbling schools has been announced by the Labour government days before its first Budget. But unions are warning the cash will not be enough to restore buildings to a 'satisfactory condition' across the country.

Chancellor Rachel Reeves says children 'should not suffer for' the state of the UK's public finances. Labour says it needs to fill a '£22 billion black hole', with steps to do this set to be announced in the Budget on Wednesday (October 30).

According to the Treasury, the £1.4 billion will 'ensure the delivery' of a school building programme which was announced back in 2020, with plans to refurbish or rebuild 500 schools by the end of the decade. The Chancellor said: “This Government’s first Budget will set out how we will fix the foundations of the country.

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"It will mean tough decisions, but also the start of a new chapter for Britain, by growing our economy through investing in our future to rebuild our schools, hospitals and broken roads. Protecting funding for education was one of the things I wanted to do first because our children are the future of this country. We might have inherited a mess, but they should not suffer for it.”

The scheme seeks to carry out construction projects at a rate of about 50 a year. According to the National Audit Office, the government last year forecast it would complete fewer projects than initially planned.

The £1.4 billion is understood to be a £550 million increase on last year to support the programme. The Treasury also confirmed £1.8 billion would be allocated for the expansion of Government-funded childcare, with a further £15 million of capital funding for school-based nurseries.

Primary schools can now apply for up to £150,000 of the £15 million, with the first stage of the plan expected to support up to 300 new or expanded nurseries across England, it said. Ms Reeves also said she would triple investment in free breakfast clubs to £30 million in 2025-26 after having announced at Labour’s party conference a £7 million trial across up to 750 schools starting in April next year.

Labour’s manifesto committed to spending £315 million on breakfast clubs by 2028–29. Education Secretary Bridget Phillipson said the funding would help 'put education back at the forefront of national life'.

“This is a Budget about fixing the foundations of the country, so there can be no better place to start than the life chances of our children and young people,” she said. “Our inheritance may be dire, but I will never accept that any child should learn in a crumbling classroom.”

However, economists have warned that most of the funding announced today will be enough only to keep existing initiatives going. Institute for Fiscal Studies researcher Christine Farquharson said that 'in a tight fiscal context' the commitments 'largely reflect decisions to continue programmes'.

She told the PA news agency: “Putting £1.4 billion into the school rebuilding programme next year will be enough to keep what was always intended as a 10-year programme going in its sixth year. £1.8 billion for the rollout of new childcare entitlements similarly confirms plans set out under the previous government.

"Bumping up the breakfast club budget to £30 million does seem to be a boost on the previously-announced £7 million - but this is still only a tenth of what the Labour manifesto plans to spend by 2028-29, so the bulk of the rollout lies ahead.” Unions also insist the funding announcement leaves a shortfall in terms of what is needed to restore the school estate.

They have urged the Government to increase investment in next year’s spending review. General secretary of the Association of School and College Leaders, Pepe Di’Iasio, welcomed the extra £550 million. But the union warned the sum was 'pretty modest' set against the challenge at hand, and described the target of rebuilding 50 schools a year as 'woefully unambitious'.

Head of the National Education Union Daniel Kebede said the money was a 'first step but more is needed', while NAHT general secretary Paul Whiteman urged ministers to commit to a 'major' rebuilding programme next year. “There remains a significant shortfall in terms of what is needed to restore the school estate to a satisfactory condition,” he said.

The announcement comes after more than 100 schools, nurseries and colleges in England were forced to shut down days before the autumn term last year following concerns that classrooms and other buildings containing reinforced autoclaved concrete (Raac) were unsafe.

Another £44 million has been announced to help kinship and foster carers, which will include piloting a new kinship allowance across up to 10 local authorities to test whether offering financial support can increase the number of children taken in by family and friends. Meanwhile, some £16 million is to be allocated to improve the running of HM Revenue and Customs to crack down on tax evasion, which the Government estimates will raise an extra £6.5 billion a year for public services, as reported by the Mirror.

The measures would include upgrading the office’s app to allow people to make voluntary self-assessment payments in instalments and seeking to increase the answer rate of phone calls to the department, the paper reported. Ms Reeves has also called on Government departments to make efficiency savings of two per cent - freeing up 'billions' of pounds that would be reinvested in the front line, according to the Sunday Times.

Ms Reeves will use her first Budget as Chancellor next week to announce a change to the UK’s debt rule that will open the door for the Government to spend billions more on long-term infrastructure, such as replacing dilapidated buildings on the public sector estate. She is expected to target public sector net financial liabilities (PSNFL) as her new measure of debt rather than the current yardstick of underlying public sector net debt.

A shift to PSNFL would give her greater headroom to meet her debt reduction target, because it includes a wider mix of state assets and liabilities - notably including expected student loan repayments to offset some of the liability. Had PSNFL been used as the metric in the March 2024 budget, the 'headroom' - the margin by which the fiscal rule is met – would have increased by £53 billion, according to the Institute for Fiscal Studies.

She is also expected to hike employer national insurance by up to two percentage points and cut the earnings threshold at which employers pay contributions - measures that would raise a combined total of around £20 billion. Capital gains tax, inheritance tax and fuel duty are among some of other levers Ms Reeves could potentially pull to raise revenue as she seeks to put the economy on a firmer footing.

In an interview with the Observer, the Chancellor suggested she wanted the statement to match the greatest moments in Labour’s economic history. “In 1945, we rebuilt after the war; in 1964, we rebuilt with the ‘white heat of technology’; and in 1997, we rebuilt our public services. We need to do all of that now,” she said.