David Blunkett, the Education Secretary, announced on Wednesday that centrally-directed spending through the Standards Fund is to be set at Pounds 500m - up Pounds 200m on the previous year.

Local authorities will have to provide half of the funding for most of the projects for which grant is available - in the past councils provided only 40 per cent.

The Government has already notified councils of its priorities for grants and has told councils it will not require matched funding for schemes intended to cut class sizes. Funding is also to be provided for local authority early-years’ development plans.

The Chancellor, Gordon Brown, announced in his pre-Budget speech an extra Pounds 1 billion for local authority spending on schools. Spending on repairs is to be boosted by Pounds 250m in the next year as part of the New Deal for Schools.

The spending programme includes an additional Pounds 83m for colleges of further education and a 50 per cent increase in access funds to encourage students with non-traditional qualifications.

The Government’s priority welfare to work programme will increase spending in 1998-99 by an additional Pounds 606m.

The total to be spent on education next year will be within the financial limits set by the last administration. However, Mr Blunkett said Pounds 800m had been re-allocated - it will be used to raise standards, fund the Government’s lifelong learning initiative, and promote training for the unemployed.

The problem for local authorities is that the extra Pounds 1 billion for education is unlikely to do much more that maintain existing services. The real increase in spending is likely to be 2 to 3 per cent, which, depending on the level of pay increases for teachers, may only stave off cuts.