Of all the issues raised by the White Paper, Excellence in Schools, the proposals on finance are inevitably at the core of the debate for school managers - and could cause the most headaches for the Government.
It says it intends to continue along the same lines as the previous Conservative administration in giving schools maximum control of their own resources. "Schools have thrived on the opportunities offered by delegation of budgets and managerial responsibilities," says the White Paper. "They should be able to decide, wherever possible, what services they want to buy, and from whom they want to buy them."
One key factor in the reforms will be the role of local education authorities. Though they will be required to delegate more of their budgets to heads and governors, they will also have new financial powers and duties. Under the current regulations, at least 85 per cent must be delegated, the rest being retained for central administration and services such as educational welfare and school transport. The plan is for 100 per cent to be devolved. But 100 per cent of what? The Government has yet to spell out what spending is to be included or excluded from the calculation.
Though there are few details in the White Paper, the Department for Education and Employment says greater delegation to schools will mean "levelling up towards school budget management responsibilities currently held by grant-maintained schools". If this is to be taken at face value, the implications are startling.
Grant-maintained schools are currently given budgets representing all their own spending, plus an element for those central services carried out by the LEA. If all schools were to operate on the same basis, as the DFEE suggests, it would mean LEAs' budgets would consist only of the income they were able to attract from schools choosing to buy their services.
It is more likely that the whole issue will be framed in a different way as the new Government is in favour of giving the authorities a role- albeit a clearly defined one.
The aim, the White Paper says, is to make school budget setting "as simple, transparent and fair as possible". There will be a "clear separation between the funds for LEA functions which need to be retained centrally and those for school functions which should be delegated".
However, if LEAs are to be allowed to take a slice out of the overall schools budget to enable them to perform their expanded functions, 100 per cent delegation of what remains in the schools budget could, in fact, mean less money going directly into schools.
The DFEE will only say that this will mean a review of the formula by which an LEA works out how much money to allocate to schools. However, it says there will be equal treatment for schools and clearer identification of LEA functions and funding.
The way the Government allocates resources to LEAs is an important area for reform. Complaints that some local authorities and their schools receive less than others - socially and economically similar - are legion. The White Paper promises a review of "the way funding is allocated between different parts of the country, so that schools' budgets fairly reflect their circumstances" including things they have in common - such as having to teach the national curriculum - and those things which differentiate them - including relative social disadvantage. Again no specific details have yet been put out for consultation, though they are promised.
At the heart of this problem is the formula used by the Government to decide how much cash to give each local authority - the Standard Spending Assessment. A review of the SSA, often criticised as bearing little relation to reality, will be welcomed by many local authorities. A common funding formula for all authorities, akin to that used for grant-maintained schools, is also a possibility.
Estimates for last year show funding can vary among metropolitan authorities - between Pounds 3,540 for each primary child in the Corporation of London and Pounds 1,485 in Rochdale. Similarly, spending per secondary pupil can vary between Pounds 3,482 in Kensington and Chelsea and Pounds 1,991 in Bradford. How far these differences represent real differences of need, anomalies in the funding formula or differences in local spending priorities is hard to pin down. But the DFEE is considering the development of "a basic entitlement which would represent the minimum amount per pupil which any schools would expect to receive". Any changes to the way needs are assessed or in the freedom given to local authorities to target spending will inevitably impact on the funding reaching schools.
John Fowler, assistant head of education at the Local Government Association, sees winners and losers as an inevitable consequence of the proposals. And he is worried that attempting to create a set amount to be spent could undermine the cherished principle of local democracy.
Bringing grant-maintained schools into local management schemes also poses problems. They have chosen to manage without the supervision of a local authority - a freedom they will not want to give up. They are worried that the new co-ordinating and monitoring role being given to LEAs will mean money being taken out of their budgets.
Ministers have reassured GM schools that they are looking for ways to protect their funding, and the DFEE stresses that there should be no "unnecessary disruption" to GM schools. But until the details are decided, some time before the new schools framework is due to come into force in April 1999, the fears will remain.
The SSA is set to rise by 5 per cent next year and Education Secretary David Blunkett has written to all LEAs urging them to pass on this money to schools. Current law gives him no power to do this, though he proposes to take powers to set out "key national requirements in future".
HOW FUNDING WILL BE REORGANISED
* The Secretary of State will be able to set certain financial requirements
* Former GM schools to be subject to local management schemes
* Spending responsibilities of LEAs and schools to be clarified
* Overall LEA spending on schools may be controlled
* Minimum funding per pupil may be set
* LEAs must consult all schools on funding arrangements
* LEAs to have powers to take control of finances of under-performing schools
* LEAs to decide local priorities on capital spending
* Private sector investment to be encouraged
NEXT WEEK:Advanced skill teachers - another escape route from the classroom?