Council leaders accused Education Secretary Charles Clarke, of delivering a slap in the face for local democracy after he proposed using new powers to force Croydon and Westminster to set minimum budgets for education.
But compromises reached in meetings this week meant the Department for Education and Skills stopped short of using an order in Parliament to force the issue. According to government figures, the boroughs had planned to pass on less than 75 and 60 per cent respectively of the extra money it wanted to see going to schools.
Westminster schools will now receive an extra pound;3 million after the council agreed to increase its education budget by pound;2m and the DfES granted an extra pound;1m.
Simon Milton, Westminster Council leader, said: "This is a victory for common sense." The council had threatened to seek judicial review, and the DfES had now accepted that expecting the authority to find all the extra money was "flawed".
In Croydon's case schools will receive an extra pound;1m, pound;250,000 from the council and the rest in additional central government grants. The council claimed it was a DfES retreat because the department had now accepted that the authority would be providing schools with pound;2.5m from its capital fund.
The DfES denied it was backing down and said because of its intervention schools would be receiving more money.
The authorities were among several struggling to find all the money the Government said should be passed on to schools, even with huge council tax rises.
Southern authorities have suffered from a general redistribution of government grants towards the North and the Midlands. A survey by the Chartered Institute of Public Finance and Accountancy this week showed that the average council tax bill will rise by four times the rate of inflation and exceed pound;1,000 for the first time. But, as The TES revealed last week, despite the tax rises hundreds of teachers and support assistants in at least seven LEAs face redundancy because of shortfalls in school budgets.
In Barnet, headteachers estimate that 150 staff will be lost from the north London borough's secondary schools, which are facing budget cuts ranging from pound;100,000 to pound;400,000.
Nick Christou, chairman of Barnet Secondary Heads' Association and headteacher of East Barnet school, said: "How can a government that genuinely feels its wants to raise standards allow schools to be decimated like this?"