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Budget squeeze threatens merit pay rises

Guaranteed funding for performance-related pay could be scrapped in order to plug a pound;360 million hole in the Government's spending plans.

The grant, which funds merit pay rises for experienced staff on the upper pay spine, is ring-fenced and paid directly to schools.

It is one of a number under threat because ministers need to find yet more money for local authorities.

Headteachers warned that the move would mean some senior teachers would not get pay rises they deserve because money would not necessarily go to the schools where it was most needed.

The pound;360m gap for 2005-6 was revealed by an analysis of the Government's funding announcement made last week.

Ministers plan to transfer pound;1.3 billion from the Department for Education and Skills' budget to local authorities by 2005-6. Education Secretary Charles Clarke told Parliament that 14 Standards Fund grants would be scrapped - including those for nursery places for three-year-olds, school improvement and threshold payments - and the cash re-allocated. But the total amount spent on these direct grants is just pound;940m.

The planned expansion of the specialist schools programme will further squeeze money available for existing programmes such as literacy and numeracy and behaviour improvement.

Ministers are planning to at least double the number of specialist schools to 2000 by 2005-6. This year more than pound;100m will be spent on the programme from the Standards fund.

Phil Willis, education spokesman for the Liberal Democrats who carried out the analysis, said that the Government had been forced to move money into local authority budgets to avoid creating "losers" from its new system of funding councils.

"The story of Labour's first term was inflated spending announcements,"he said.

It is beginning to look as though the story of the second term will be lots of hidden cuts."

The DfES admitted that it would need to transfer money for performance pay to local-authority budgets but said it would consult on ways to ensure that the money reached schools that needed it.

A DfES spokesman said: "We will be looking at all our programmes to make sure that money is spent on the priorities - tackling discipline in the classroom, cutting bureaucracy, workforce reform and boosting leadership.

"We will need to have a long, hard look at all our programmes so that we can ensure money is spent wisely."

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