Dedicated Schools Grant

History and purpose of the Dedicated Schools Grant (DSG)

The Dedicated Schools Grant (DSG) was introduced in 2006. Prior to the introduction of the DSG, the government had provided a non-ring-fenced notional amount for education within each local authority’s total funding.

The DSG provides revenue funding for local authorities, to support expenditure on schools, early years and children and young people with high needs. The grant is made under section 14 of the Education Act 2002.

The DSG was divided into three blocks in 2013, and in later years, an additional fourth block was added. The blocks are:

• The early years block – this funds the various free early years childcare and education entitlements
• The schools block – this is the main source of revenue funding for mainstream schools
• The high needs block – this funds complex special educational and alternative provision
• The central schools services block – funds statutory functions retained by local authorities for all schools in an area

In the 2025/26 financial year, the total provisional value of the DSG (all blocks, before the DfE deducts money for academies, which it funds directly) is around £68.8bn.

The schools block is the largest of the blocks, and in 2025/26 is worth around £48.7bn.

How are DSG allocations calculated?

The schools and high needs blocks of the DSG are calculated using separate national funding formulas.

Schools National Funding Formula

The main schools block is calculated using the schools national funding formula (NFF). This was introduced in the 2018/19 financial year. It allocates funding according to pupil numbers and characteristics (such as deprivation levels and prior attainment), area costs, and other factors. The formula generates a notional allocation for each school in each local authority area.

These notional amounts are summed, adjusted and passed to local authorities. Local authorities then share out the funding between schools in their area, according to a local funding formula. The DfE has increasingly required local authorities to move closer toward the NFF factors and values.

High needs national funding formula

The high needs block is also calculated using a national funding formula. This takes account of things such as how much the local authority spent on high needs in the past (‘historic spend’), and proxy measures for SEND need, such as levels of disadvantage, prior attainment, and the number of children in poor health.

Further information on formula design

Full details of how the DfE calculates schools block and high needs block allocations for local authorities can be found in DfE guidance, The national funding formulae for schools and high needs (November 2024) (pdf)

Variations in per pupil schools block funding by local authority

By design, different local authorities receive different amounts of schools block funding per pupil. The Excel download file published alongside this debate pack provides information on per pupil schools block funding for all 151 local authorities in England with published data.

Funding outside of the DSG

Some school and other education funding is paid outside of the DSG, including:

• Pupil premium funding for disadvantaged, looked-after, previously looked-after and service children
• 16 to 19 funding, which is calculated and paid according to a separate formula
• Funding for increases in employers’ national insurance
• Funding for home-to-school transport. This comes out of local authorities’ general budgets

Current issues

Teacher pay and school budgets

Most of schools’ revenue budgets are spent on staff pay and on-costs. The pay round for teacher pay in the 2025-26 academic year is currently underway.

Each year, the statutory School Teachers’ Review Body (STRB) makes a report to the government, recommending the pay framework for teachers. The government then responds, and publishes the School Teachers’ Pay and Conditions Document (STPCD). Currently, the STPCD applies to teachers in maintained schools in England, and to teachers in academies on protected terms and conditions. Academies may also choose to voluntarily follow the STPCD for other teachers.

Although the STRB report for 2025/26 has not yet been published, the press has reported that it may recommend higher pay increases than foreseen by the government. Subsequently, the Prime Minister’s official spokesperson was quoted in the press as saying “there’ll be no additional funding for pay if recommended awards exceed what departments can afford”.

Teaching and leadership unions have responded by saying any pay increases need to be adequate. They have also called for increases to be fully funded by the government, arguing that failure to do so will put pressure on schools’ budgets.

The NASUWT teaching union told Schools Week it would formally ballot members if the government rejected any STRB call for higher pay than budgeted, and is also calling for full funding for any award.

The National Education Union made similar comments and said it may pursue a strike if the pay offer was too low, and not fully funded.

High needs block deficits and the ‘statutory override’

Many local authorities in England currently have DSG deficits, frequently resulting from pressures on their high needs budgets.

Since 2020, the government has allowed local authorities to exclude DSG deficits from their main revenue budgets. This accounting treatment (‘the statutory override’) means local authorities do not breach their statutory duty to set a balanced budget.

The statutory override initially covered the financial years to 2020/21, 2021/22 and 2022/23, but the override period was subsequently extended to cover years up to and including the 2025/26 financial year.

There have been concerns about what may happen should the override expire. The Local Government Association (LGA), for example, has warned that many councils could become insolvent.

The government has said that it is reviewing the SEND system and is considering what should happen to councils’ deficits and the statutory override, as part of that. It intends to publish the results of the review later in the year.