Fewer pupils, more unfilled places, increasing deficits: What can be done?

According to local authority (LA) forecasts, most schools are facing falling primary school pupil numbers. Some are facing very large falls

Primary school numbers have fallen by 70,000 since 2017/18. In London, they have fallen by 50,000. (See our previous blog for a full run down.)

In the latest available forecasts, from May 2023, 85 per cent of LAs projected a decline in the number of primary pupils in their area by 2027/28, and a fifth were projecting a decline of more than ten per cent.

Nationally, LAs were anticipating a fall in primary pupil numbers of around 4.5% (200,000) between 2022/23 and 2027/28.^[i] This is significantly larger, on average, than the reduction seen to date.

Regionally, LAs in Inner London expected to see the largest fall in percentage terms, as the chart above shows. An 11.9 per cent fall represents a decrease of around 25,000 pupils. Across the whole of London, the projected fall in pupil numbers between 2022/23 and 2027/28 is around 50,000, which would approximately repeat the fall since 2017/18. Large falls are expected by LAs in some other regions too. In both the North-West and Yorkshire and the Humber, the projected falls represent around 30,000 pupils.

Despite this pressure, very few LAs are reducing their primary school capacity

While DfE projections focus on the number of pupils, it’s important to relate this to the space available in schools. LAs project their primary school capacity annually. In this data, ‘capacity’ means ‘schools places’, and is generally determined by the nature of each school’s buildings. In the latest available data (from May 2023), only eight out of 150 LAs had firm plans to reduce primary school capacity, despite 85 per cent of LAs predicting a fall in numbers.

With pupil numbers falling fast and capacity projected to increase, the percentage of primary school places that are unfilled is projected to rise from 12 to 16 per cent over the next five years, as shown in the following chart. In Inner London, the situation is more extreme, with unfilled places projected to rise from 20 per cent to 30 per cent over the same period.

Having spare space can create opportunities for schools (as discussed below) but also means they need to maintain buildings with funding for fewer pupils. For some schools, the cost of having so many unfilled places is likely to outweigh the benefits of having extra space as it creates budgetary pressures. In extreme cases, it may possibly lead to closure in future.

New policies could potentially make a difference. For example, the intention to levy VAT on independent school fees may lead to a small increase in the number of pupils in the state-funded sector, but it is not anticipated this will affect the overall, national trend of falling numbers in publicly-funded primary schools.

Schools appear to be responding

Aside from place planning, the school system appears to be responding to the financial implications of falling pupil numbers in a range of ways. For example, our previous blog showed that schools appear to be reducing the total number of classes where they can, rather than the number of pupils in each class. Additionally, national statistics show that the number of teachers and other staff employed in primary schools has fallen recently (albeit not as fast as pupil numbers), although this might also be due to other factors.

Despite these measures, more LA-maintained schools have negative financial reserves than they did five years ago. This is particularly the case in areas where pupil numbers are falling the fastest, as we showed in our previous blog. In their recent report, London Councils also highlighted the rising number of LA-maintained schools that have in-year deficits. Academies are vulnerable too. In a recent survey, the Confederation of School Trusts found that financial sustainability was a top priority for trust leaders and those from large multi-academy trusts ‘are particularly likely to see falling rolls as a major risk to their financial sustainability’. 

Falling pupil numbers will not be the only factor here (funding SEND provision and the increased cost of living are also huge issues for many schools), but given pupil numbers largely determine a school’s funding, it is a big problem and it can also make other problems worse.

So, what can be done about this?

The combined picture suggests that continuing falling pupil numbers will cause more primary schools to face significant financial strife in future unless they find ways to cut costs substantially or funding is significantly increased.

In the remainder of this blog, we consider some options which are available to schools, LAs, and the Government to manage falling rolls. Of course, this is not to imply that all options are equally desirable and or will be applicable in all situations. School leaders and LAs will need to weigh up the costs and benefits for individual contexts.

Schools can reduce their costs

The most obvious way for schools to respond is by reducing costs where possible. Staffing makes up by far the biggest share of a school’s overhead costs, but it may be difficult for school leaders to cut staff by reducing the number of classes in a year group, unless pupil numbers fall dramatically.

One possibility is that schools may look to create mixed-age classes in an effort to save the cost of teachers and teaching assistants. However, such decisions clearly depend on school circumstances, and we have only been able to find limited evidence on the benefits and challenges of a mixed-age approach.

Schools may pool resources with other schools or consider mergers

Where practical, schools with falling rolls can reduce their costs by sharing staff and office functions. There are many different models for this, including partnerships, collaboration federations and formal mergers. It’s difficult to find conclusive evidence of their effect on academic standards, but one study on federations in England found positive effects after two to four years, while another large-scale study on primary school mergers in China found younger pupils’ grades fell while the older students’ grades rose.

Another option available to school leaders is to set up an informal partnership with neighbouring schools and the LA to cap new admissions in certain year groups. This might mean, for example, agreeing to distribute requests for new admissions in particular year groups to certain schools, which may in time help schools to reduce class numbers in their most affected year groups while benefiting from fuller classes in other year groups. Alternatively, it could involve proactively assigning new admissions to certain schools which have the largest excess capacity in a year group. This is to avoid larger classes in a particular year group at one school when a neighbouring school has a lot of spare places. However, both options would require a significant amount of co-ordination and trust between schools in the partnership. Furthermore, school leaders cannot refuse to take new pupils if they have space and the parents want their child to attend that school. 

Schools could use their excess space for new provision

The trends of falling pupil numbers and rising unfilled places highlights the fact that many schools may not be fully utilising their existing space. A recent Teacher Tapp survey found three in ten schools have at least one spare classroom.

Before it was elected, Labour committed to opening 3,000 new nursery classes in schools, primarily as a means of meeting growing demand for childcare as eligibility to free childcare is expanded. Recently, the new government announced the first tranche of funding for 300 schools to convert existing space into nurseries.

In theory, finding new uses for this space can help schools maintain their income levels. However, not all space is suitable for nursery-age children and conversions will incur new costs too. As such, offering nursery classes is only likely to help schools struggling with falling numbers of primary children if the net effect on school finances is positive. Given that half of all pre-school childcare providers reported that their current income did not fully cover their costs in 2023, it is doubtful many schools will achieve this.

LAs could consider closing schools, but this is very challenging in practice

LAs are legally responsible for school place planning and must support schools to remain financially viable as well as educationally excellent. In theory, closure prevents schools with the greatest drop in pupils from becoming completely unviable while also benefitting other struggling schools in the vicinity by boosting their numbers.

However, closing schools is a challenging process. A primary school can represent the heartbeat of the community and a more isolated area may be facing the prospect of losing its only school. Local authorities can face fierce opposition to any such proposals from parents and local residents. It’s also impossible to predict future demand with precision, so LAs have to weigh the efficiency gains of school closure against the risk of needing to find more space for pupils again in future.

Government can change admission arrangements to help ensure a level playing-field for schools

Maintained schools and academies are not always treated the same in admissions allocations. In our previous blog, we found some evidence that when pupil numbers fall, they fall more in LA-maintained schools than academies in the same area.  

The Government’s proposed Children’s Wellbeing Bill will require all schools to cooperate with LAs on school admissions and place planning. This is not currently the position which has led to calls for a more level playing field. The proposed legislation could help ‘spread the pain’ and allow LAs a wider set of options when trying to strategically manage admissions in a local area.

Government can increase per-pupil funding faster than inflation, which would reduce the financial blow of falling numbers 

For government, the overall level of school funding in the National Funding Formula will determine how changes in pupil numbers are likely to be felt by schools.

In the first blog in this series, we highlighted how falling pupil numbers can present the Government with the opportunity to save money whilst holding per-pupil funding flat. On the flip side, the Government could use falling pupil numbers to increase per-pupil funding without needing to find ‘new money’.

For a given school, if per-pupil funding increases faster than numbers fall, then it will not face a budget cut. Of course, this will only make a school better off if its funding increases faster than its costs (which are largely determined by staff wages). Where pupil numbers are falling more than ten per cent over the course of four to five years, increasing per-pupil funding enough to maintain overall budgets in real-terms would cost a huge amount.

Government offering schools ‘parachute payments’ would give schools some breathing room whilst pupil numbers are falling quicky

DfE has recently announced new funding to protect schools with falling rolls, but it requires schools to expect an increase in pupil numbers again within three to five years. This stipulation is likely to mean most schools with falling numbers which are seeing their intake fall year-on-year are ineligible to apply. However, it could be a sign of things to come. If similar payments were to be made more widely available in future, it would buy schools some time to adjust.^[ii] This is important because the previous government made changes to the national school funding formula which meant that school funding relies more heavily on pupil numbers than in the past.

Action will be needed

This blog series has highlighted a clear and present danger to the financial sustainability of many primary schools, particularly in London, but beginning to affect other areas too.

In this blog, we have set out a series of different options that schools, LAs, and government could take proactively to tackle this problem. Falling pupil numbers should not be used as an opportunity to cut the total school budget. Instead, increasing per-pupil funding rates whilst numbers fall would give schools the means to improve their provision, including by cutting class sizes.

Beyond funding, it is likely that a mixture of different options will be needed, particularly given the challenge will look very different in different areas. As such, consideration should be given to all the available levers so that schools can plan ahead to ensure continuity for the children they teach.

References

[i] In addition to the LAs’ forecasts, DfE produces national projections of pupil numbers. In their most recent projections, which were published in June 2024 (more recently that the LA data), DfE is also forecasting a fall of around 200,000 in primary school pupil numbers between 2022/23 and 2027/28.

[ii] The National Funding Formula does include a lump sum for all schools, but this will not increase to help schools with rapidly falling numbers. Likewise, the formula includes elements which protect a school’s per-pupil funding from one year to the next. These elements do not directly protect overall funding, and therefore do not address the financial challenge presented by falling pupil numbers.

Read the first two blog posts in this series