Next week, Gordon Brown will reveal the outcome of the comprehensive spending review and how the spoils will be divided between different departments.
But in a letter to David Blunkett, the Education Secretary, David Hart, general secretary of the National Association of Head Teachers, said: "It is essential that the additional funding is not siphoned off by local authorities on the way.
"Furthermore, the additional funding should be accompanied by reform of the system of allocation, so that the vast disparities within the education system are not perpetuated."
He said that 35 per cent of the additional Pounds 835 million meant for education this year had been kept back by local authorities. The funding system also means that a primary school in Kensington and Chelsea receives Pounds 2,384 per child, while a Greenwich school receives Pounds 1,909 per child.
Mr Hart said: "The system of funding is a complete lottery. It produces vast disparities in funding that bear absolutely no relation to the cost of delivering the curriculum in schools across the country."
He said a 200-pupil primary school in Northumberland would get Pounds 439, 000 more if it received the same money per pupil as those in the highest-funding authorities.