A private education company that has increased its charges for services to schools has told heads to consider sacking teachers to balance their books.

EduAction, which runs schools in the London borough of Waltham Forest, has written to every head warning them that “staff redundancies may be unavoidable” as a result of budget shortfalls.

The letter lists the “significant” increases in teachers’ salaries and changes in costs for teachers and support staff among the five most common reasons for the budget problems.

It states: “The size of some potential deficits means that in most cases a balanced budget can only be met by reducing the number of staff employed at the school.”

But the governor of one primary faced with losing three classroom assistants says increased charges by EduAction has had a significant impact on their budget.

She said: “Some of the support services we pay for have doubled this year.”

Her school received its letter on the same day as it won an achievement award for good results in key stage 2 tests.

She added: “We achieved those results by having the extra staff. Now it looks like we are going to lose our classroom assistants.

“It is possible that our pupils will lose their swimming lessons and music services we buy into will have to stop or parents will have to make up the difference. All the things that make primary school a bit more fun will probably have to go.”

There is also concern at the way the money has been allocated. “Having spoken to other heads and governors, there is a feeling that something is just not right. We know councillors voted in a record education budget. Where has it all gone?” said the governor.

EduAction took over education services in Waltham Forest last September after the local authority received a highly critical inspection report from the Office for Standards in Education.

The crisis emerged after the National Union of Teachers voted at their annual conference to take strike action where jobs, pay or conditions are threatened by the privatisation of services.

The NUT representative for Waltham Forest, Ron Haycock, said at least a third of the schools in the borough did not have enough money to balance their budgets this year.

He said: “This is the first time EduAction has set a budget and it is totally unprecedented for so many schools to be unable to balance their books. It is a potential disaster.”

David Hart, general secretary of the National Association of Head Teachers, has written to Education Secretary Estelle Morris asking her to intervene. He said: “There will be a significant number of schools in trouble. From the information I have received I would not rule out redundancies.”

Stephen Hay, Waltham Forest’s executive director for lifelong learning services, said: “At present, of the 93 schools in Waltham Forest, there are about 12 or 15 schools which have indicated that they are unable to set a balanced budget.

“EduAction will work with these schools to see whether or not setting a deficit budget is appropriate, and, if so, how the deficit will be removed in future years through an agreed business plan.”