Right now, more and more stories are emerging around councils reviewing or abandoning their catering services, caterers ceasing to trade, and school leaders making financial sacrifices so pupils get fed.
And with one study already predicting schools could be footing the bill to the tune of more than £310 million, Seb Godwin of Procure Education says this points to a system in crisis, which will escalate further if it’s not nipped in the bud.
Modelling from Northumbria and Lincoln Universities in October last year suggests under-funding could leave schools across England with a collective gap of more than £310 million per year by 2026 / 27 as free school meals (FSM) provision expands to newly eligible pupils under universal credit changes. This, the study says, is the equivalent of more than the salaries of 7,700 teachers.
Looking at the trends, it’s easy to see how this is having a wider impact. Recently, Stoke-on-Trent City Council announced it will move its school meals provision to external providers after finding its in-house catering arm could no longer break even without significant subsidies from schools. An independent review concluded that meal prices would have needed to rise by more than a third simply to cover costs – something neither the council nor schools felt was fair or even feasible. Instead, external providers are being brought in to drive what the authority describes as “better value for money”.
Likewise, caterers are closing because they can no longer survive in the current funding model, with one very well regarded provider recently announcing it will cease trading in 2026 due to funding and cost pressures.
The way we fund and resource school meals in the UK is fundamentally dysfunctional – the system is in crisis. And the worst part is that schools are still being expected to pick up the tab – at the expense of teaching, learning, and pastoral care – just to subsidise meals that should be fully funded as part of national educational and welfare policy.
Chronic under-funding and rising costs are squeezing schools
The Department for Education currently funds FSM at £2.61 per meal in England (under updated rates for the 2025 / 26 academic year). But the real cost of preparing, serving, complying with national food standards, staffing, energy, insurance and food commodities is consistently estimated to be between £3.15 and £3.45 per meal.
In practical terms, that means there is a shortfall of roughly 54p to £1 for every free meal served. According to a LACA survey in 2025, 80% of caterers believe current FSM funding is inadequate, and almost half report shortfalls of between 50p and £1 per meal – forcing reductions in staff hours and even roles to stay afloat.
And it is not only FSM that’s impacted, mainstream school lunch prices have been steadily rising, with councils reporting average prices of £2.63 for primary and £2.79 for secondary meals, up significantly from just a few years ago. It’s a “perfect storm” of rising food, labour, energy and compliance costs, often with no matching increase in funding. In short, schools are subsidising national policy through their core educational budgets.
The human and educational cost of under-funding
This means a child might be eating smaller portions, or even skipping meals because the quality or variety has been compromised to make ends meet. Schools and caterers are already trimming portions, reducing menus, and using cheaper ingredients to cope, with nearly half (47%) of caterers admitting they have had to modify recipes or reduce options to manage financial shortfalls.
At the same time, the number of children eligible for FSM is rising sharply. Over 25% of pupils in England are eligible, and eligibility is expanding further as the government commits to extending FSM to all children in households on Universal Credit – potentially adding hundreds of thousands more children to the FSM roll.
And, as schools face reduced real-terms budgets, funding for meals has not kept up with inflation. In 2025, the government increased FSM funding by 3p per meal, a 1.2% rise that was widely described as insufficient when food inflation has outstripped this increase. School leaders warned that this would force schools to subsidise meals from general budgets – and everyone saw it coming.
We need a coherent policy response
A series of ad-hoc measures won’t fix this, and change has to happen at multiple levels. At a national level, FSM funding needs to be reset so it reflects the real cost of providing a nutritious meal. At a minimum, this means funding in the region of £3.15 – £3.45 per meal, with an annual uplift linked to food and labour inflation. Crucially, this funding should be ring-fenced, so budgets allocated for meals are actually spent on just that. Any expansion of FSM eligibility must also be matched by proper, additional funding otherwise the financial burden will just continue to be passed onto schools.
Local authorities also have a key role to play, with catering recognised as part of their statutory duty of care, not treated as a line item that can be cut to make short-term savings. Where catering is outsourced, councils must ensure contracts reflect the true cost of delivery and protect quality, rather than driving a race to the bottom that leaves smaller schools unable to participate – and contractors going out of business.
Finally, schools and trusts have been looking at ways to move towards outcome-based contracts that reward quality, good nutrition, pupil uptake and sustainability. This is a good move. Greater collaboration between trusts and local authorities can also help, creating economies of scale and establishing shared standards that enhance provision across the system.
What would be troubling, is if we were to normalise the whole situation, where councils outsource services because they cannot subsidise them any longer, and where caterers exit the market because the economics do not add up. If we truly believe that breakfast and lunch at school are essential to wellbeing, attainment, and social equity, then we must fund them properly.
