Schools funding row is ‘shape of things to come’, IFS warns

Think-tank says spats over Treasury “stinginess” are likely to be a regular feature of debates over the coming years
Chancellor Rishi Sunak: stingy and short-sighted, or prudent and practical? Credit: PA

By Jim Dunton

07 Jun 2021

The Institute for Fiscal Studies has suggested that the Treasury could have compelling reasons for baulking at Department for Education proposals to spend £15bn on catch-up funding for schools and warned of the likelihood of similar spats over coming years.

DfE education recovery commissioner Sir Kevan Collins quit his role last week after barely four months in post when the government allocated just £1.4bn to provide extra support and tuition to help pupils make up for lost schooling during the pandemic. The Treasury is believed to have blocked approval for the £15bn package of measures recommended by Collins.

IFS research fellow Luke Sibieta and research economist Ben Zaranko acknowledged the long-term costs of the education lost because of Covid-19 “could easily run into the hundreds of billions” as a result of skills and productivity shortfalls.

But they said HM Treasury also had to consider if DfE’s suggestion the funding would be a one-off was realistic and whether it would make up for lost learning in the most effective way.

“Department officials might solemnly promise the Treasury that these measures – such as an extension to the school day – will not be permanent and that the funding is strictly time-limited,” Sibieta and Zaranko wrote in a blog.

“But in a year or a couple of years’ time, when the funding is about to run out, they’ll have an incentive to request an extension, brief the media to support their case, try to get the prime minister onside, and do their utmost to make the funding permanent.”

They added that any pledges by DfE would be “time inconsistent” because it would always be in the department’s interest to argue for the support measures to be extended.

“The Treasury knows this. More than anyone,” they said. “They know that it is far easier to turn the spending taps on than it is to turn them off again – just look at the example of the ‘temporary’ uplift to Universal Credit.

“Once schools and parents grow accustomed to longer school days and more one-on-one tutoring, they may be reluctant for those programmes to be unwound.”

Sibieta and Zaranko said an anticipated uplift in the UK’s financial outlook might make the government’s hint that more schools funding could be found in the autumn spending review appear prudent. But they acknowledged that spending commitments delayed until the autumn would mean actual measures were not implemented “well into 2022” and that chancellor Rishi Sunak would be deluged with requests from departments whose operations had been adversely affected by the pandemic.

“The UK economic outlook has improved in recent months, and the outlook for the public finances is also likely to have improved. But we won’t get another set of forecasts from the Office for Budget Responsibility until the autumn,” they said.

“There may well be a ‘windfall’ on the way – but the Treasury presumably want to wait to see how large that windfall is before they go about spending it.”

Sibieta and Zaranko concluded that the argument around funding for education recovery should be seen as “indicative of things to come” in relation to other battles between departments and the finance ministry.

“The parsimony of the Treasury, perceived or otherwise, is likely to be a regular feature of debates over the next few years,” they said.

“Difficult choices and trade-offs around spending, taxes and borrowing will have to be made. There’s also a debate to be had about the UK’s fiscal rules and budgeting framework, and how these might be redesigned to encourage better policymaking.”

Sibieta and Zaranko said there may well be a case for treating some education spending more like capital spending: as an investment that, if spent well, can produce future economic returns.

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