Schools across England are receiving approximately £500 million in additional funding to support a 3.5% teachers' pay increase for the current school year, a move designed to reduce the likelihood of industrial action by the National Education Union (NEU), the country's largest teaching union.
Previously, schools had been required to absorb part of the 3.5% pay award from their existing budgets—a prospect that prompted strong objections from NEU leadership. The additional funding represents a significant shift in how the government is financing the pay settlement and addresses one of the union's core grievances in ongoing negotiations.
Daniel Kebede, General Secretary of the NEU, characterised the funding offer as a "significant" development in talks between the union and government. In correspondence sent to the union on Wednesday, the government outlined how the increase would be financed through reductions in employers' contributions to the local government pension scheme.
According to the government letter, a 4.9 percentage point reduction in employer contribution rates will generate substantial savings on the pay bill for support staff—savings that will not be reclaimed by central government. The NEU calculated that this mechanism would release approximately £500 million that schools can now direct towards teacher pay this year.
The pay settlement itself was announced in July, when ministers endorsed the independent School Teachers' Review Body's recommendation for a 3.5% increase effective from 1 September 2026, to be followed by a 3% rise in the subsequent year. According to government guidance, the two-year package is worth £1.8 billion in total additional funding across 2026-27 and 2027-28, with £700 million allocated for 2026-27 and £1.115 billion for 2027-28.
Independent analysis by economists at the Institute for Fiscal Studies had previously identified a funding gap of around 1% between rising school costs and available resources for the current year. The newly announced £500 million adjustment has the potential to narrow or eliminate this shortfall, bringing funding levels more closely into alignment with the following year's settlement.
What the union leadership says
Kebede stated that schools have been "running on empty" and characterised the government's funding announcement as "a welcome return to reality, and a message of hope for the entire school community." His comments reflect the union's long-standing position that schools cannot sustainably fund pay increases without additional central government support.
The strike ballot timeline
In April, the NEU conducted an indicative ballot in which 90% of participating teachers indicated willingness to take industrial action over funding and pay concerns, though turnout was 48%. A formal strike ballot was scheduled to open on 3 October and close on 15 December, creating the possibility of teacher strikes in early 2027.
The NEU's national executive is due to meet on 24 September to decide whether to proceed with the formal ballot in light of the government's funding offer. The decision will be crucial in determining whether the education sector faces disruption in the coming months.
Key Facts
- Schools receive £500 million in additional funding to support the 3.5% teacher pay increase for 2026-27
- The funding comes from savings generated by reduced employer contributions to the Local Government Pension Scheme
- The two-year pay package totals £1.8 billion, with the pay award covering both teachers and support staff
- A formal strike ballot scheduled for October-December may be cancelled following the NEU's 24 September executive meeting
- An April indicative ballot showed 90% of teachers would support industrial action over pay and funding
