Head teachers say they face “difficult choices” over what their schools can afford, as a new report says they could be forced into further cuts next year.

The Institute for Fiscal Studies (IFS) says costs will outpace funding for schools in 2025-26.

Schools say that means they will struggle to fund the government’s proposed pay rise for teachers, as well as the support needed for children with special educational needs.

The Department for Education (DfE) said it would work with schools and local authorities to provide a “fair funding system that directs public money to where it is needed”.

The IFS estimates that school funding will rise by 2.8% in the 2025-26 financial year. But Wednesday’s report warns that costs are likely to rise by 3.6%, leaving schools facing tough choices.

Staff pay usually takes up the majority of a school budget. The government has suggested teachers’ pay should go up by 2.8% for the school year beginning September 2025, in line with plans for school spending.

While spending on schools has grown in recent years – redressing previous cuts – the cost of supporting pupils with special educational needs and disabilities (Send) has also increased.

Marlborough St Mary’s School in Wiltshire has had to find money from its existing budget to support pupils like six-year-old Thomas, who is waiting for an autism assessment.

His mum, Penny Reader, says Year One pupil Thomas loves everything about space and creatures who live under the sea.

He has one-to-one support at school, but was declined an Education, Health and Care Plan (EHCP) – which sets out a child’s legal right to support and additional funding – last year. A tribunal date to appeal that decision has been set for November.

Mrs Reader says it is “utterly insane” that the school does not get additional funding to support Thomas, who would previously hide in the classroom getting distressed and upset.

“He just couldn’t cope with the other children,” Mrs Reader says. “It was too noisy, too chaotic for him.”

Now, Thomas loves being at school and can join in with all of his lessons, she says.

“It’s just so reassuring,” says Mrs Reader. “It’s so lovely to see him thrive.

“Without that, Thomas wouldn’t be here. That funding has made such a huge difference.”

Head teacher Dan Crossman says the school is in an in-year deficit, spending more money than it has got coming in.

He says he faces a choice between meeting the needs of the children, or balancing the books.

Additional funding to support pupils with Send often takes a long time to materialise, he says.

So, Mr Crossman employs six teaching assistants to meet the needs of children awaiting additional support, such as through an EHCP.

“It means that they are safe. It means that they are happy, and it means that they have the opportunity to learn in a mainstream school,” he says.

Mr Crossman says schools face “really hard” decisions, like staff redundancies and cutting counselling services.

The school has received financial support from a private donor to set up a forest school.

But Mr Crossman says such resources should come from “core budgets” rather than private investment.

The IFS says per-pupil spending in mainstream schools rose by about 11% between 2019 and 2024, when adjusted for inflation.

But much of that increase was absorbed by the rising cost of Send provision, meaning the actual increase was only about 5%.

The new analysis comes as the government considers its spending plans for 2026 onwards.

Steve Hitchcock, head teacher of St Peter’s Primary School in Devon, and the region’s National Association of Head Teachers (NAHT) representative, says he has also had to come up with innovative ways to raise more money.

He says sourcing top-up funding is now a “really important part” of his role.

“Just in this last year I’ve managed to find £20,000 myself, which is just going out to our very generous community,” he says.

The “absolutely fantastic” parent-teacher association has also raised £20,000 in the last year through sponsored challenges, film nights and discos at the school.

In the past, this money would go to “cherry-on-top” activities like play equipment. But now, it has to fund basic curriculum resources like buying paper, Mr Hitchcock says.

Staff costs take up 85% of the school’s budget. Mr Hitchcock says pay rises are “very important” to recruit and retain staff, and to make sure it’s a competitive profession.

The government’s recommended 2.8% pay rise for teachers next year is being considered by the independent teacher pay review body.

Education unions have already described the proposal as being disappointingly low, but Mr Hitchcock says he does not know where he will find the extra money, even without any further increases.

“A nearly 3% pay rise is going to mean I have to find £30,000, which just isn’t possible,” he says.

“We were hoping desperately that this government would have a different approach to funding schools. It’s going to be enormously challenging for the whole profession.”

Daniel Kebede, National Education Union general secretary, says schools have “no capacity to make savings without cutting educational provision”.

Julie McCulloch, from the Association of School and College Leaders, says the financial pressures facing the sector are a “death by a thousand cuts”.

“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,” she added. “But we cannot go on like this.”

The Department for Education said school funding will increase to almost £63.9bn in the next financial year, including £1bn for children and young people with high needs.

A spokesperson said the government is “determined to fix the foundations of the education system”.

Additional reporting by Hope Rhodes.