# Labour finds £500m to fund teachers' pay rise

> Labour secures £500m to fully fund teachers' 3.5% pay rise after last-minute U-turn
- Title: Labour finds £500m to fund teachers' pay rise · Dailymail
- Summary: Labour secures £500m to fully fund teachers' 3.5% pay rise after last-minute U-turn Education Secretary Lucy Powell uses pension savings to cover teacher pay…
- Keywords: labour, teachers, pay rise, national education union, pension savings, school funding, teacher strikes, uk government, news, entertainment, finds, 500m
- Source: Dailymail — https://dailymail.com/news/article-16136615/Labour-500m-fully-fund-teachers-pay-rise.html?ito=1490&ns_campaign=1490&ns_mchannel=rss
- Published: 2026-09-16T15:42:33+00:00
- Read time: 2 min
- Topics: labour, teachers, pay rise, national education union, pension savings, school funding, teacher strikes, uk government, news, entertainment
## Labour's last-minute U-turn
Education Secretary Lucy Powell reversed Labour's decision not to fully fund the teachers' pay rise, providing £500m from pension savings.

> Finally, we have a government that accepts the reality that any teacher pay award must be fully funded
## 3.5% pay rise details
The pay increase is 3.5% this year and 3% next year, with schools expected to cover 1.8% through existing budgets.
## NEU strike threat
The National Education Union (NEU) threatened walk-outs after Christmas if the government didn't fully fund the pay rise.
## Pension savings solution
A 4.9 percentage point reduction in local government pension contributions will deliver £500m to cover the pay increase.
## NEU response
NEU General Secretary Daniel Kebede called the government's move a significant concession to teachers' pay demands.

> Be in no doubt that the significant ground conceded by government is a consequence of NEU members' willingness to take a stand
## Government assurance
The government confirmed schools can cover the costs of the pay award at a national level through pension savings.
## Strike ballot delay
The NEU plans to discuss its response to the government's letter on September 24, delaying its strike ballot.
## Union support
The NASUWT union praised the government for finally addressing teacher pay funding concerns.

> Finally the government has seen sense and started to address the issue we have been raising for months around the funding of the teachers' pay award
## Pension scheme impact
The pension scheme change reduces employer contributions by 4.9 percentage points, freeing up £500m for teacher pay.
## Government's priority
The government emphasized teacher recruitment, retention, and wellbeing as top priorities for Education Secretary Lucy Powell.

> Supporting teacher recruitment, retention and wellbeing, and rebuilding the relationship with the profession are among her top priorities
## Pay rise impact
The pay rise remains unchanged at 3.5% this year despite the funding change.
## NEU's stance
The NEU hopes the government's move marks a turning point in valuing education and ending classroom austerity.

> We hope today marks an important turning point, and one we as a union will aim to build from
## Funding mechanism
The £500m comes from reduced pension contributions, not new government spending.
## Strike avoidance
The government aims to avoid walk-outs by fully funding the pay increase through pension savings.
## Pension savings details
The pension savings are from a 4.9 percentage point reduction in employer contributions to the local government pension scheme.
## Government's confidence
The government states schools can cover the costs of the pay award at a national level through the pension savings.
## Key takeaway

Education Secretary Lucy Powell uses pension savings to cover teacher pay increase, avoiding strikes