State schools in England will have to find £3bn in savings by 2019-20, says the public spending watchdog.
Schools face 8% budget cuts and about 60% of secondary schools already have deficits, warns a funding analysis from the National Audit Office (NAO).
The Department for Education is about to launch a new funding formula, which will see 10,000 schools gaining money and similar numbers losing.
To ease the transition, those losing will have annual cuts limited to 1.5%.
Education Secretary Justine Greening will reveal later on Wednesday how the different funding rules will be applied – with suggestions that it could mean reduced budgets for schools in inner London.
It is likely to mean bigger budgets for areas which have been less well-funded – with areas such as Barnsley and Plymouth highlighted as currently getting less than Hackney or Coventry.
“These historic proposals will mean schools are funded according to the needs of their pupils, not their postcode,” says Ms Greening.
Life chances ‘at risk’
The government’s new national funding formula is designed to stop inequalities which see schools in different parts of the country, with similar intakes, receive different levels of per-pupil budget.
It will mean reallocations of funding, but the NAO report highlights shortages in the overall budget.
It says that schools are not prepared for the “scale and pace” of the cuts facing them.
Five head teachers’ and teachers’ unions have issued a joint statement saying schools face the “biggest real-terms cuts in a generation”.
Malcolm Trobe, head of the Association of School and College Leaders, said: “We are deeply concerned that the life chances of young people are being put at risk by the government’s under-funding of education.”
The NAO report says funding is not keeping pace with increased pupil numbers and rising costs of national insurance and pension contributions – and the budget gap will have reached £3bn by the end of the decade.
The overall budget is protected against inflation, but the NAO report says that rising numbers of pupils will mean schools will face cuts in real-terms per-pupil income.
The report says that about 60% of secondary schools are in deficit, and forecasts shortfalls averaging £326,000 by 2020.
There is also a warning that the Education Funding Agency, part of the Department for Education, is not intervening rapidly enough when there are financial concerns about schools.
School leaders have warned of deepening financial problems – with head teachers in West Sussex threatening that this could mean cutting school hours.
Almost every state school head in the local authority had written to the Prime Minister Theresa May in the autumn warning of the “dire financial position”.
Bigger class sizes
“Schools are struggling to function adequately on a day-to-day basis, and, in addition, we are severely hampered in our ability to recruit and retain staff, work with reasonable teacher-pupil ratios and to buy basic equipment,” said the letter from more than 250 heads.
A joint statement from heads’ and teachers’ unions – ASCL, NAHT, NUT, ATL and Voice – says that schools “urgently need additional investment”.
“We are already seeing job losses, increased class sizes and cuts to courses in our schools and colleges,” it says.
A Department for Education spokesman said that currently “schools have more funding than ever before for children’s education, totalling over £40bn”.
He added that the national fair funding formula would “give head teachers certainty over their future budgets, helping them make long-term plans and secure further efficiencies”.
Shadow education secretary Angela Rayner said: “This is the reality: the Tories are cutting school budgets.
“All we have seen from this government is six years of turmoil in our schools and nothing to show for it.”
Liberal Democrat education spokesman John Pugh said the government had “completely the wrong priorities”.
“It is a disgrace that while schools face a severe funding crisis, £240m is being spent on expanding grammars,” he said.