The government’s spending watchdog has demanded schools hand back the Pounds 2 billion of surplus cash that has been built up over the past nine years.

A National Audit Office report released yesterday called for the Department for Children, Schools and Families to “encourage” local authorities to claw back school surpluses in order for them to be redistributed in line with local need.

During 2007-08, Pounds 250 million was given to local authorities but not spent by schools, and the overall surplus has tripled over the past nine years, or 6 per cent of total revenue funding for schools.

Edward Leigh, chair of the Public Accounts Committee, said: “Parliament does not give local authorities money to hold it for a rainy day; they are given it to spend on today’s children in schools.”

But the announcement will be given an icy reception by many headteachers, particularly after last week’s Budget, which forecast a bleak future for schools.

Many heads are expected to turn to their surpluses once the Government starts to make drastic spending cuts in an attempt to repay public debt.

But according to the F40 Group, which is made up of representatives from the 40 lowest-funded authorities, local councils do not have the power to ask for surplus money back from schools.

Ivan Ould, vice-chair of the F40 Group, told The TES that any decision on matters around funding is up to the schools forums.

“It is the Government who set up the schools forums in the first place,” he said. “They have taken the responsibility away from local authorities and into the hands of headteachers.”