Clarke insists councils held back schools cash

Minister accuses local authorities of withholding vital money for school improvements

Charles Clarke, the Secretary of State for Education accused council leaders yesterday of withholding £500m from schools and warned they could be stripped of their funding powers.

Mr Clarke announced a review of budget setting procedures after the furore that has left schools facing big deficits and seen many teachers threatened with redundancy.

He told the annual conference of the National Association of Schoolmasters Union of Women Teachers that councils had so far failed to allocate £500m of the £2.7bn additional funding for schools. He pledged to investigate how each of the 150 authorities had distributed its funds and to change the funding regulations for 2004-05 if it showed that some authorities acted against the best interests of schools.

Nationally, there was more than enough money in the system, he said. He said that education funding had risen by 11.6 per cent in cash terms to provide £2.7bn extra while schools faced a £2.45bn rise in costs. Mr Clarke said some authorities had diverted money away from schools revenue budgets into capital spending or special needs projects.

Mr Clarke said those were not necessarily the wrong decisions but added he would investigate each authority and judge each case on its merits. But councils insist they have passed on the money and blame the Government for miscalculating how much extra was needed by schools.

Mr Clarke conceded the situation was "destabilising and demoralising" and pledged to "sort it this year and make sure it does not occur next year. I think schools are entitled to know what money is coming to them," he said. "What would be a disaster is schools take decisions that lead to the redundancies of staff and then get more money later in the year."

He told the NASUWT that he would publish a detailed analysis of how each local authority had allocated money to its schools on 2 May. He said it would not be right to name and shame until after the local government elections on 1 May.

Officials later refused to rule out any options, including the direct funding of schools by central Government. They also did not exclude the possibility of Mr Clarke releasing extra funds to help struggling schools. However they said it was "conceptually possible but practically we do not see this happening".

Sir Jeremy Beecham, chairman of the Local Government Association, insisted councils were spending £100m more on education than the Government expectations.

In a speech to the NASUWT Sir Jeremy acknowledged figures for the speculated funding shortfall need to be checked and rechecked. "What we do know is, this year, local councils are spending £100m more than the Government has allocated on their local schools. So claims that, in general, local authorities are underfunding and holding back money provided by central government are unfounded."

Sir Sandy Bruce-Lockhart, the Conservative leader of Kent County Council, one of the largest authorities, said local council taxpayers were being forced to foot the bill for under-funding from central government. "The Government has shortchanged many local councils by giving them half the grant increase the Government says schools need. It is the council taxpayers who are left picking up the bill."

Anew national survey claimed that up to three quarters of schools were facing serious budget deficits. The study by the National Association of Head Teachers found only a quarter of headteachers have seen their budgets rise by 10 per cent – the figure the Government acknowledges is needed to cover teachers' pay rises and increases to national insurance and pension contributions. David Hart, the NAHT's general secretary, said: "It is inevitable that there will be a large number of redundancies, unless the Government does something now to resolve the crisis."

Doug McAvoy, general secretary of the National Union of Teachers, said: "Mr Clarke will blame anyone but himself. That does not help the children in our schools who are faced with a lack of resources."