He hailed it as a “major investment” which showed the Government’s commitment to choice and raising standards, but the National Association of Head Teachers says it has caused resentment.

The PSI in Wales was seen as an attempt by right-winger Mr Redwood to generate interest in competitive funding schemes in an area where opting out was unpopular.

At the time such a scheme was ruled out for England, but this week it was revealed that Prime Minister John Major and Education Secretary Gillian Shephard are considering such plans.

Under the plans capital funding for buildings would be given to schools on the basis of pupil numbers. It would enable schools wanting to take on more pupils to borrow money for new buildings.

But the Welsh scheme appears to have rewarded schools planning to expand their numbers rather than those which, however popular, want merely to improve their facilities for existing pupils.

Bassaleg comprehensive in Newport, Gwent, secured Pounds 2m to build a new library and resource area, reception office, computer rooms and science block. It plans to admit 30 more pupils a year.

But just a few miles away Caerleon comprehensive, also extremely popular with 270 applications last year for 231 places, failed in both its two bids for cash for a new hall, sports facilities and permanent classrooms.

Headteacher Adrian Davies said: “I was never given a reason why we failed but I assume it was because we wanted to improve facilities for existing pupils rather than expand.”

Andrew Keep, head of Prestatyn high school in Denbighshire, received Pounds 3.4m for facilities. He said: “I’m happy that we have got the money but I’m not desperately keen on the philosophy of making schools compete for funding. ”

David Winfield, Welsh NAHT secretary, said: “It’s unfair that authorities have had money deducted from them for this.”