In the private sector, the managing director of a firm with aPounds 5-10 million turnover would earn Pounds 55,000 a year, the Confederation of British Industry says. Secondary heads have a comparable job, yet only 0.2 per cent of them earn that much.

Primary school heads, meanwhile, earn an average of only Pounds 30,000 a year, which would be the salary of a manager in private industry with “significantly less responsibility”, the CBI says.

“Headteachers’ pay should perhaps have been raised more significantly at a time when the responsibilities of the head were significantly increased by local management of schools and other reforms,” it remarks.

In its consultation document Does it Add Up?, published last week, the CBI also calls for higher starting salaries for teachers to attract more able graduates into the profession.

It points out that teachers’ starting salaries slipped into the bottom quarter of all graduate salaries in 1995.

On the question of whether Britain’s Pounds 36 billion education budget needs to be increased overall, the CBI says more research is needed. But it argues that savings of some 5-10 per cent of the total could be made in some areas to pay for more spending on others, such as the pay of key teachers.

Among areas where it suggests savings could be made are surplus school places (where the Audit Commission has estimated that Pounds 100m could be released), school sixth forms and grant-maintained schools.

While recognising that smaller primary classes would do much to raise standards, Britain’s business leaders are reluctant to advocate shifting money from secondary or higher education to pay for them.

A sudden, nationwide shift of funds from secondary to primary schools would be “a move into uncharted waters”, they say, and would mean extra spending in the short term to avoid putting pupils at a disadvantage as they move through the system. They point out that local education authorities which have shifted funds from secondary to primary schools have not so far found any improvement in GCSE results.

The CBI sets its face even more firmly against shifting funds from universities to primary schools. “An expanded, high-quality higher education system is a key adjunct to a competitive economy,” it says. Cutting its budget “would not be supported by business”.

As Adair Turner, director general of the CBI, said in last week’s TES, the document also sets out options for changing the methods of funding education. These include; * allowing local authorities to spend more, but not less, than central government suggests; * introducing an element of payment by results into schools and universities; * inviting any under-performing schools to bid for extra cash, conditional on meeting stiff targets.

Copies of Does it Add Up? can be obtained from the CBI Publications Unit on 0171 395 8035, price Pounds 10 for CBI members, Pounds 20 to non-members.