control over how the schools budget is spent. But new Labour is changing all that. Jon Slater reports

IF the billions spent by the Government on schools are squandered, everyone knows who to blame - the Education Secretary.

But that would not be entirely fair: historically ministers have had surprisingly little control of how the money is actually spent. It is up to local authorities - who often have very different priorities - to distribute cash to schools. Even the total amount they spend on education does not have to match ministers’ recommendations.

This situation was never likely to be popular with new Labour, impatient to see its education vision become reality. With pound;19 billion in his pocket and Tony Blair looking over his shoulder, David Blunkett has to get a bang for his buck. His tactic has increasingly been to by-pass councils and fund favourite projects directly. To achieve this, a small and little-known funding stream known as GEST (grants for education support and training) has been turned into the much better-known standards fund - a pound;1bn river of cash.

Next year there will be 31 separate categories of standards fund grants. As well as money for general school improvement, these cover initiatives including advanced skills teachers (the so-called super-teachers), support for pupils with special needs and literacy and numeracy.

The advantage for ministers is that not only can they target resources to their preferred areas but they can also claim the credit for any resulting improvements.

“It is common practice in the Department for Education and Employment to give ministers money for their pet schemes,” says Tony Travers, local government expert at the London School of Economics. “Every education secretary since Shirley Williams has done it. But the proportion of education spending paid through specific grants has risen in the last two years.”

The standards fund is just the most visible example of centralisation. Overall, the percentage of the education budget spent directly by central government will have risen sixfold by next year - from 1 per cent in 19956 to 1.4 per cent in Labour’s first year in office to 6.4 per cent in 20001. This is despite the fact that spending on nursery education has been returned to education authority control.

While hard-up local authorities will always welcome extra money, standards fund cash comes with strings. In many cases, authorities have to bid for the cash and to qualify they must match the funding. They also have to follow strict rules on the amount of the grant they delegate to schools.

Last year, a TES analysis revealed that schools in some areas were losing more than pound;270 per pupil due to the failure of their local authority to make successful bids for central funds.

Graham Lane, education chair of the Local Government Association, believes that teething problems have been addressed. “Its not a competitive process,” he said. “If you meet the criteria for funding you usually get it.”

But other concerns remain. Critics argue that central control of the purse-strings is undermining local democracy - local people have no say in how the money is spent.

“It is very difficult for an authority like Wigan to find the matching funding. The extra money coming through is going on the Standards Fund. Schools and parents are being told there is extra money coming into the system but they are not seeing it in their disposable budgets,” said Avril Walton, assistant director of education at Wigan.

Mr Lane would like local authorities to be more involved in determining where standards fund money goes. The requirement for councils to match the Government’s contribution further reduces their room to manoeuvre - especially when you consider that about 80 per cent of their budget goes on staff salaries.

However, while the standards fund reduces local decision making it does bolster authorities in another way. By themselves, schools are unlikely to be willing or able to prepare bids.

And although the proportion of funding controlled at the centre could rise further, ministers seem reluctant to create a central funding formula.

Politically it would be a double-edged sword. They would gain control but would also be lumbered with sole responsibility. Without councils to share the blame parents and schools would blame ministers for any cuts in funding.

Tony Travers describes this as “a continuous conflict at the heart of the DFEE. They want to influence where money is spent but they don’t want to be held wholly accountable,” he said.

This conflict could ensure councils retain some discretion over spending. But it does not mean that the pressure on local authorities will ease.

One possibility is that local budgets would be fixed centrally. “I think that the DFEE would like to see education spending ring-fenced,” said Mr Travers.

Other methods of influencing councils’ behaviour - inspections, action plans and threats of private sector takeover - will also continue to be used to encourage them to toe the line.

And ministers are likely to remain tough on failing authorities - especially those whose priorities do not match their own.