Schools in England are to get around £500 million in extra funding towards the teachers’ pay award this school year, reducing the risk of a strike ballot by the largest education union.

Schools had been expected to fund some of the 3.5% teachers pay increase for the current school year out of their existing budgets, which National Education Union (NEU) leaders had strongly objected to.

Daniel Kebede, the General Secretary of the NEU, said the offer of more funding was a “significant” step in negotiations.

In a letter to the union on Wednesday, which has been seen by the BBC, the government said the increase would be funded by savings in employers’ contributions to the local government pension scheme.

The letter said the 4.9 percentage point drop in what employers are expected to contribute will deliver “significant savings” on the pay bill for support staff, which will not be clawed back by central government.

The National Education Union said it expected the extra money to be around £500m, which schools can now use towards teachers pay this year.

In July, ministers accepted the recommendation of the independent pay review body for teachers and agreed a 3.5% increase from September 2026 would be followed by 3% the following year.

The pay increase had been partly funded by an additional £700m for 2026-27 and £1.1bn for the following year.

Independent economists at the Institute for Fiscal Studies said that left schools facing a shortfall of around 1% between rising costs and funding this year.

The additional money could potentially bring the uplift for this year into line with next year.

Kebede said schools has been “running on empty” and the funding signalled “a welcome return to reality, and a message of hope for the entire school community”.

Paul Whiteman, General Secretary of the National Association of Headteachers, said the decision is “certainly welcome”, putting schools in a “better position”.

He said his union would look carefully at the detail “to determine whether this means the pay uplift is genuinely fully funded” for schools.

In an indicative ballot by the NEU in April, 90% of teachers who voted said they would be prepared to take industrial action over funding and pay, on a turnout of 48%.

A formal ballot was due to begin on 3 October and close 15 December, raising the prospects of teachers pay strikes early in 2027.

The national executive of the NEU will meet on 24 September to consider whether to call that off following the additional funding on offer from the government.

A spokesperson for Education Secretary Lucy Powell said the government was “confident schools can now meet the costs of the award at a national level”.

“The Secretary of State has been clear from day one that supporting teacher recruitment, retention and wellbeing, and rebuilding the relationship with the profession, are among her top priorities.”