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School concrete crisis shows the danger of short-term capital budget thinking

Capital budgets need to be made less prone to unpredictability.

Gillian Keegan, education secretary
Gillian Keegan, education secretary.

A wave of school building closures has plunged the Department for Education into crisis – and shows the dangers of seeing capital budgets as an easy thing to cut, write Philip Nye and Nick Davies

Growing concerns over the safety of buildings constructed with reinforced autoclaved aerated concrete (RAAC), a material in use between the 1950s and 1990s 21 , has seen the Department for Education (DfE) order more than 100 school nurseries, schools and colleges to close in whole or in part. The timing is terrible, with most pupils due to return for the new academic year this week, and the crisis has thrown affected schools’ plans into disarray – in some cases pupils are having to start the school year with remote lessons.

Ministers have been on the defensive, with education secretary Gillian Keegan caught on camera complaining that she had been doing “a f****** good job”, but the truth is that crumbling school buildings are the inevitable consequences of more than a decade of government spending decisions. 

Schools are paying the price for deep cuts to schools capital spending since 2010 

DfE capital budgets fell by more than a third between 2007/08 and 2020/21, from £7.9bn to £5.1bn (in 2022/23 prices). This fall came after the coalition government axed the Building Schools for the Future rebuilding programme – something Michael Gove, the education secretary at the time, has since said was his biggest mistake in office.  22

The Department for Education has taken some action on RAAC since 2018, but under-investment has continued. Jonathan Slater, the permanent secretary of the DfE between May 2016 and August 2020, has said that in the 2021 spending review the Treasury only provided enough funding to rebuild an average of 50 schools a year for the next 10 years, whereas civil service analysis had said a figure of 300 to 400 schools was needed. 23  

This is part of a broader story of deterioration of the school estate – a National Audit Office report in June 2023 found that 700,000 pupils were attending schools that required major rebuilding or refurbishment.  24 Meanwhile £11.4bn of maintenance was needed to get all elements of the schools estate back to a good condition according to the most recent figures available, which will not take into account the latest developments with RAAC. 25…;  

The UK has underinvested in capital for decades, with problems across the public sector  

The DfE is not the only department where capital budgets were cut as part of austerity measures – the same was true of departments responsible for other key public services, as the below chart shows. Only in the Department for Health and Social Care and Ministry of Justice was capital spending in 2022/23 higher in real terms than in 2007/08. 

It is therefore unsurprising that questions are now also being raised about the condition of council housing, hospitals, prisons and court buildings believed to contain RAAC. 26  

Seeing capital as an easy area to cut when budgets are tight not only presents a risk of critical failure, but is also a key factor in why the NHS and other parts of the public sector haven't seen increases in productivity even as more resources are poured into funding and staffing. Put bluntly: doctors, teachers and other public sector employees are not able to do their best work when they’re operating in cramped or defective buildings, or using out of date IT equipment. 

In international terms, the UK is not a big spender on capital – consistently investing less as a percentage of GDP than the OECD average since at least 1960. 

Another problem is that capital spending by government is volatile, with six times as much variation in investment growth as there is in day-to-day spending. 28  This makes long-term planning and maintenance of assets difficult, and perversely makes it more likely that already-tight capital budgets aren’t spent in their entirety. Recent governments have also raided capital budgets to cover shortfalls in day-to-day spending. Planning capital projects, only for underspends to be returned to the Treasury or for the money reallocated to day-to-day spending is a good use of no-one’s time. 

Whoever forms the next government, effort should be made to make capital budgets more predictable and less prone to the volatility, cuts and underspends seen recently. The chaos caused by the RAAC revelations of the past few days shows the danger of short-termism. 

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