Revealed: Leaked document exposes George Osborne's education cuts

Despite election pledges, the front-line schools budget is not increasing in real terms

George Osborne is allowing classroom spending to fall, according to the Department for Education’s document, leaked to The IoS (AFP)

George Osborne is secretly breaking his flagship pledge to protect spending on schools, according to the Government's own analysis, revealed in a document leaked to The Independent on Sunday.

A confidential paper drawn up by civil servants assessing the Department for Education's finances reveals that the Chancellor's promise in 2010 to increase the front-line schools budget in real terms for four years "is not, in fact, what is happening".

The document says: "Schools are subject to a real-terms cut in their funding because the rate of inflation is currently higher than forecast at the time of the Spending Review [in November 2010]."

The startling admission by the Department for Education, in October last year, shows that Mr Osborne is allowing spending on schools to fall in real terms. Yet, in December, when he published his Autumn Statement, he claimed that he was keeping his pledge. The statement said that it "[confirmed] that the Government will continue to protect spending on core public services, including the NHS and schools, for the spending review period".

The revelation will put further pressure on Michael Gove, the Education Secretary, who is already under fire over allegations of bullying and smears by his closest advisers in his department. The Conservatives were dragged into a separate row over state education yesterday when Maria Hutchings, the Tory candidate in the Eastleigh by-election, appeared to criticise state schools in the constituency. Mrs Hutchings said she would need to send her 12-year-old son to a private school for an education that would enable him to become a surgeon.

Last week, The IoS revealed leaked documents showing plans by the Department for Education to place academies in the private sector, to save costs in Whitehall. The new document, revealed today, analyses what the 2010 Spending Review means for the DfE budget.

It says that the additional funding for the premium for disadvantaged pupils, additional funding for the academies programme, and keeping national funding for schools at the same "nominal level" per pupil "enabled the Chancellor to say that he had increased front-line schools budgets by 0.1 per cent in real terms in each year of the Spending Review period (subsequently referred to as the 'schools protection'). This is not in fact what is happening: schools are subject to a real terms cut in their funding because the rate of inflation is currently higher than forecast at the time of the Spending Review". The review period runs until 2014.

Despite the cut in funds because of higher inflation, Mr Osborne did not increase spending on schools in December 2012 to correct for the shortfall, he just claimed he was continuing "the protection". Spending has been maintained in cash terms – ie, before inflation is taken into account – on the £2.5bn pupil premium, the £1bn capital programme and per pupil funding in schools. Yet inflation has left schools with a real terms cut.

Labour's education spokesman, Stephen Twigg, said: "Michael Gove and David Cameron need to come clean. While the Tories promised to protect school budgets, this shows they are being cut. As the independent Institute for Fiscal Studies shows, education has had the biggest cut in spending since the 1950s. The truth is Michael Gove wants to take our schools backwards – reducing the budget to spend on one-to-one tuition and cutting money for repairs. All this threatens school standards."

The Treasury and the Department for Education declined to comment on a leaked document.

But a Treasury source said: "On the latest GDP deflator forecasts – available since this alleged DfE paper – the SR10 schools settlement is forecast to be above a 0.1 per cent average annual real growth rate across the Spending Review."

In December, the head of the UK Statistics Authority, Andrew Dilnot, rebuked the Prime Minister and the Health Secretary, Jeremy Hunt, for claiming that NHS spending was increasing in "real terms" when it had fallen slightly in 2011/12. Labour had written to Mr Dilnot complaining that Mr Cameron's "misleading boasts" about protecting NHS spending were not true.

Mr Dilnot said: "On the basis of these figures, we would conclude that expenditure on the NHS in real terms was lower in 2011/12 than it was in 2009/10." The fresh row could lead to another complaint from Labour to Mr Dilnot.