Education minister Estelle Morris announced this week that there will be pound;2.9 billion in the pot to improve standards in England’s schools for 2001-02.

Funding will now be allocated on a formula basis and more than 50 ring-fenced grants will be grouped under six headings, allowing headteachers more flexibility about what cash should be spent on.

Schools will be free to carry over unused Standards Fund money to the end of the academic year rather than being forced to spend it by March 31.

Education authorities will have to raise around pound;700 million in matched funding.

Ms Morris said: “This increase in the Standards Fund means schools will have more money to target on key prioities.

“I am also making significant changes to make it less cumbersome.

“The system of making payments only after receiving claims submitted by schools will be replaced by an automatic stream of payments based on agreed priorities and allocations.”

David Hart, general secretary of the National Association of Head Teachers, said that the move would cut bureaucracy and give heads the chance to decide priorities. “We do not doubt that there will still be particular projects that the Government insists money must be spent on, but the changes will give more opportunity to move money around and carry money forward.”

The six allocation headings are: school improvement, inclusion, standards and curriculum, diversity and excellence, teachers and capital and infrastructure.