There will be no additional funding for public sector pay, the Treasury has confirmed, setting tight limits on what schools and teachers could receive in 2026-27.
In its , the Treasury said government departments must fund any pay awards from existing budgets, with no extra money provided beyond spending review settlements.
It said the government had delivered above-inflation pay rises over the past two years but that these required “difficult trade-offs” across wider public spending.
The Treasury said that the fiscal context remains “tight”, with departments expected to manage pay pressures alongside other priorities.
It warned that if pay review body recommendations exceed what departments have budgeted for, these costs must be met through offsetting savings or productivity improvements.
Tight limits on teacher pay
The documents state that if departments cannot absorb pay awards in full, the government will not be able to accept them.
The Treasury also asked pay review bodies to take into account slowing wage growth in the wider economy.
It said public sector workers benefit from greater job security and more generous pension packages than those in the private sector, and this should be considered alongside pay.
The Treasury added that private sector wage growth is expected to continue slowing as labour market pressures ease.
Figures published last week showed that lowered government recruitment targets are being exceeded for primary teacher training, but missed for secondary training.
The overall number of recruits into teacher training has increased by 11 per cent, up from 26,920 in 2024-25 to 33,355 in 2025-26.
The Office for Budget Responsibility (OBR) is forecasting average weekly earnings growth of 3.2 per cent in 2026-27 and inflation of 2.2 per cent.
In October, the Department for Education submitted its evidence to the School Teachers’ Review Body (STRB), recommending a 6.5 per cent pay increase for teachers split across three years.
The 6.5 per cent deal would be weighted towards the latter part of that period, it wrote in its submission.
Education secretary Bridget Phillipson asked the pay review body to make teacher pay recommendations for the next three years, rather than just 2026-27, to give schools more certainty over their budgets.
The STRB is expected to make recommendations for the next two years by February. It will also give an indicative recommendation for 2028-29.
The DfE will then make its final teacher pay decision. While the government does not have to follow the STRB’s advice, it has accepted its recommendations for the past two pay awards.
The Treasury’s economic evidence to the pay review bodies and the DfE’s submission to the STRB suggest that any teacher pay rise next year is likely to be close to the level of inflation.
Teachers were given a 4 per cent pay rise for the 2025-26 academic year, but schools were expected to find the first 1 per cent of this rise from “efficiencies”.
Daniel Kebede, general secretary of the NEU teaching union, said the Treasury was “picking a fight with the teaching profession” by refusing to provide additional funding for teacher pay.
He said that expecting schools to fund pay rises from existing budgets amounted to “continuity austerity”, warning that heads were being asked to make cuts “where there are none left to make”.
“The document takes no account of the economic damage caused by teacher pay cuts,” he added.
Mr Kebede said the approach would worsen teacher recruitment and retention pressures and described it as “deeply irresponsible”, adding that teacher pay remained uncompetitive after years of real-terms cuts.
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