The governing body at 660-pupil St Luke’s High School is believed to be the first in the country to have its financial powers taken away for refusing to set a balanced budget for 199596. Governors set a Pounds 68,000 deficit budget after they were faced with sacking two teachers.

One governor, Exeter’s deputy mayor Barry McNamara, has resigned from the Conservative party and joined Labour over the issue. St Luke’s Pounds 1. 3 million budget had been reduced by 3.75 per cent on last year.

Twelve of the 14 governors voted in favour of the deficit budget, with two abstentions. Devon decided to take back financial control after county education chairman Mike Knight had asked the governors to reconsider, saying they were playing into the Government’s hands and said the county council might have to spend more on central administration if other schools went down the same road.

He said: “I am pleased that the majority of our schools are not following this course . . . It is not of our choosing to control their budget.”

But the chairman of governors, the Revd Trevor Cooper said the alternative of two redundancies would have increased class sizes to between 30 and 35. Governors had already earmarked savings of Pounds 18,000 on books and equipment, but the LEA could now choose to make another teacher redundant.

“All the governors feel very strongly about having been put in this invidious position . . . We deplore this lack of funding,” Mr Cooper said. “The teachers are backing our action and parents are particularly supportive.

“Until a few years ago governors had no control over the budget and we have never had that much financial power anyway. More than 75 per cent of the budget goes on salaries and the rest pays the bills.”

The governors will retain responsibility for policy on sex education, collective worship and other matters such as health and safety.