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There will be 400,000 fewer pupils in England’s school system by 2030, suggest. Primary numbers alone are projected to fall by about 7 per cent between January 2025 and the end of the decade.

In London and the North West, the drop in pupil numbers is already becoming increasingly prevalent. Empty Reception cohorts, unfilled secondary places and debates over mergers and closures are now routine.

As fertility rates fall across every region, similar pressures are spreading across England, albeit unevenly, the data shows.

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In theory, fewer pupils could present opportunities such as smaller classes, more personalised support and lower workload pressures for teachers.

However, in practice England’s funding system is heavily reliant on headcount, which means demographic decline quickly becomes a financial shock.

Leadership, safeguarding, utilities and premises costs do not fall at the same speed as pupil numbers, and a drop of just a few pupils per class is equivalent to a full teacher’s salary.

Researchers at the National Foundation for Educational Research (NFER) warn that this shock is not evenly distributed. Their analysis shows that schools with weaker Ofsted grades - often those serving more disadvantaged communities - are significantly more likely to have spare capacity.

“The schools serving the most disadvantaged communities are going to be most hit by falling rolls,” says research director Jenna Julius.

This raises a complex question: can a funding model so reliant on pupil numbers continue to work in a time of contraction? And if not, what might alternatives or additions look like?

Tweaking a funding system built on headcount

Despite the widespread concerns over falling pupil rolls, there is little appetite to completely restructure the (NFF).

For Jon Andrews, director for school system and performance at the Education Policy Institute (EPI), the mechanics of falling rolls are simply how the system is designed to work.

“Schools having fewer pupils get less money. That’s not a flaw,” he says. In a semi-competitive system, popular schools attract more pupils, and therefore more funding, even when numbers are falling overall.

Instead, the EPI argues that the NFF could do more to cushion sudden funding shocks for individual schools. Currently, protections prevent per-pupil funding from dropping too steeply year-on-year, but Andrews suggests similar safeguards could apply to total school budgets.

He also stresses that the overall schools budget should not drop just because pupil numbers decline.

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Julius from the NFER agrees that the current funding formula is “fairer” than what came before, but says it remains “very sensitive to the number of pupils in a school”.

Losing three or four pupils per cohort can equate to the cost of a teacher, without giving a school any realistic way of cutting fixed costs, she warns.

There is also a political trade-off, Julius says. A system solely focused on efficiency would close more small rural and under-subscribed schools. But closing them brings significant community consequences, particularly with regard to access to education in sparsely populated areas.

Policymakers must decide how much inefficiency they are willing to tolerate to preserve provision, she argues.

Similarly, Luke Sibieta, research fellow at the Institute for Fiscal Studies, sees little alternative to pupil-led funding. Anything that shifts towards school-level allocations risks centralising decisions about openings and closures in Westminster.

Instead, he says there is a stark choice to make: “Do you reduce the number of schools and teachers to match fewer pupils, or increase per-pupil funding to maintain current levels of provision?” Either path, he argues, is ultimately political.

School-level or class-based funding

Schools’ fixed costs do not fall in line with a drop in pupil numbers, and some argue that the NFF must be rebalanced so more money is school-led rather than pupil-led.

Some options include:

• Increasing the school-level lump sum.
• Making sparsity funding - allocations to schools that are remote and small - more generous.
• Introducing a funding floor based on total budgets.
• Funding the cost of running a class rather than each pupil.
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The NFER has class-based funding for primary schools. Julius says this could smooth volatility, but warns it reduces incentives for schools to stay full and complicates how disadvantage is funded.

Increasing school-level funding without additional investment also inevitably means taking money away from other schools, which is a tough redistributive choice that ministers will have to justify.

Sir Dan Moynihan, chief executive of the Harris Federation, believes there is a strong case for temporary block grants for schools providing essential community support.

For example, there is a primary school within his trust where more than half of the pupils are homeless, and staff spend time liaising with housing officers, preventing emergency relocations, providing food and mental health support.

“Those schools are funded just for education, but they’re actually providing a welfare service,” he says. If such schools “wither and die”, he argues, those children may not get that help elsewhere.

He suggests block funding of £50,000 to £100,000 a year for two to three years to cushion schools either towards a supported closure or towards stabilising at a smaller roll. Currently, his trust is drawing on its reserves to support schools in this position.

The principle that funding an “external benefit” to society is not captured by traditional metrics, he says, is well recognised in economics. But he acknowledges the political difficulty: “Where the money comes from is for politicians to decide.”

Taking matters into their own hands

Some trusts are already reconfiguring how their schools operate as a result of a drop in pupil numbers.

Dr Daniel Doyle, chief executive officer of Newman Catholic Trust, took on a primary with just three pupils in Reception and a £250,000 deficit. Rather than accepting closure, he introduced a “small school strategy”, which meant merging year groups, streamlining leadership, centralising finance, income-generating activities and marketing the school.

Within two years, the school posted a surplus and saw double-digit Reception intakes.

Elsewhere, Tom Campbell, CEO of E-ACT multi-academy trust, highlights how trends in pupil rolls vary across the country. “We’re expanding capacity in Walsall and Birmingham, while managing falling primary demand in parts of Bristol,” he says.

The trust is expanding nursery provision to repurpose spare primary capacity and using estates and shared services more efficiently, he adds.

In the North West, David Clayton, chief executive of Endeavour Learning Trust, says pooled budgets help to ensure an equitable offer across his schools, but warns that this is “becoming harder” in an increasingly difficult financial climate.

Trusts, he argues, must take a medium-term view and work closely with local authorities on accurate forecasting.

Who should be protected, and how?

There are limitations in how the NFF reflects disadvantage and need, researchers argue.

Julius notes that factors such as homelessness or housing instability are not captured in the formula. Where possible, she argues, these should be integrated into the core formula rather than added on through new grants, to avoid complexity.

Andrews argues that persistent disadvantage, which is associated with the largest attainment gaps, is also missing from both the NFF and the pupil premium. In a period of falling rolls, he argues this is an opportunity to rebalance funding without expanding the overall pot.

However, protections within the NFF make redistribution difficult unless ministers accept that some schools will lose, he adds.

School leader unions go further. Julia Harnden, deputy director of policy at the Association of School and College Leaders, says “the government must commit, as a bare minimum, to maintaining total school funding at the current level”, warning of unplanned closures if it does not.

Ian Hartwright, head of policy at the NAHT school leaders’ union, argues that protecting funding could also enable smaller classes and more targeted support, rather than forcing leaders into “intolerable” staffing decisions.

A political problem

Falling pupil numbers create the conditions for transformative change, in principle. The additional funds could be reinvested in more support for disadvantaged pupils or in reducing class sizes.

However, the fiscal headroom created by changing demographics has already been claimed by increasing special educational needs and disabilities pressures, teacher pay deals and expanded free school meals entitlements.

Ministers, therefore, have a dilemma, Sibieta argues. They can choose to shrink the system and bank the savings, or they can use falling rolls as a chance to strengthen provision. Either way, “it has to be weighed up against all the other pressures on public services”, he says.

Meanwhile, trusts like Newman, Harris, E-ACT and Endeavour are already redesigning curriculum, staffing and estates to adapt to a shrinking system. Although tweaks and additions to the current funding formula might help to smooth out volatility, none offer a straightforward fix.

The core question is not just technical - it involves values-led judgements. How does the system decide which schools to keep open and which communities bear the brunt?

In a decade of falling rolls, these choices become increasingly difficult.

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