Schools in Wales have sat on millions of pounds over the last financial year to save for a rainy day. That was the defence of heads’ unions this week as it was revealed that Welsh schools held back Pounds 76 million - the equivalent of Pounds 165 per pupil - in their budgets.

According to Assembly government figures, there has been an eight per cent hike in cash not being spent by schools at the end of March compared to 2006-07.

The vast majority of schools held on to 1 up to 10 per cent of their budgets, but 376 schools had more than 10 per cent in reserve.

The figures led to criticism of schools in the Western Mail this week as TES Cymru-commissioned research revealed the funding gap between schools in England and Wales has peaked at 10 per cent, or Pounds 500 per pupil in an average sized secondary school.

But heads also say much of the money might have already been earmarked for projects, such as building projects and staff costs, but schools had yet to be invoiced.

They also say with recession looming and financial uncertainty, heads are wisely acting more prudently. Gareth Jones of heads’ union ASCL Cymru, said: “I have yet to meet any heads or governors who hoard money unnecessarily. It’s about prudent planning.

“Uncertainty breeds greater reserves; the greater the financial uncertainty, the greater caution school governors have about spending the budget. It’s difficult to predict what could happen this year with money becoming even tighter in the current financial climate.”

Concerns over the level of funding available for the planned roll-out of the play-led foundation phase for under-7s from September this year may also explain why almost one fifth of primaries held back more than 10 per cent of their budget.

Reserves held by primaries accounted for Pounds 47 million - 62 per cent of the total.

Iwan Guy, acting director of the National Association of Head Teachers Cymru, said: “I’m sure a lot of primaries might have been holding back money not knowing what extra funding - if any - they were going to get to implement the foundation phase.”

He said there was also evidence some LEAs gave schools extra funding from the Assembly government in March which they weren’t able to spend before the end of the financial year, bumping up their reserves further.

Mr Guy suggested schools could see their reserves wiped out entirely by rising energy costs.

The Assembly government is currently consulting on new school funding regulations that would see local authorities in Wales set school revenue funding budgets for three financial years rather than one.

The proposals follow the Assembly government’s commitment to introduce three year school budgets, recommended by the School Funding Committee Report in 2006.

They would also give the power to LEAs to direct governing bodies to spend a school’s budget surplus if it exceeds eight per cent, with the authority allowed to reclaim the excess surplus from the school’s budget if it fails to comply.