Local education authorities are to be allowed to spend Pounds 17.97 billion on schools next year, a figure that is barely in line with the amount councils are already spending.

According to the local authority associations, the Pounds 591 million increase in the Government’s assessment of what needs to be spent will not provide the cash required to halt the increase in pupil-teacher ratios.

The financial settlement for local authorities announced later is likely to mean schools budgets can only be maintained at the expense of other services. Councils have been told they are limited to overall budget increases of between 1 and 2 per cent, leaving them with the options of reducing spending or increasing council tax.

The Association of Metropolitan Authorities estimates that between 20 and 30 authorities will face reductions in Government grant.

However, the Chancellor, Kenneth Clarke, insists education is being treated as a priority at a time when the Government is attempting to reduce public expenditure.

In total, the Budget provides an extra Pounds 1bn for schools, colleges and universities. The Government expects to raise Pounds 1bn in each of the next three years from its sale of student loan debt, but Gillian Shephard, the Education and Employment Secretary, rejected suggestions that the sale was funding the extra spending on education.

She said: “The increases that have been secured are as a result of decisions taken collectively. When a department makes a saving it goes into the general Government’s coffers and is taken into account in the whole Government’s strategy.”

As well as a 3.4 per cent increase in the amount the Government assumes local authorities need to spend on education, the Budget promises an extra Pounds 156m to pay for nursery vouchers, an increase in assisted places in independent schools and the creation of sixth-forms and nursery classes in the grant-maintained sector.

Mr Clarke accepted that more investment was required to deal with dilapidated schools and announced an extra Pounds 50m capital spending.

The figures provide for Pounds 60m to be spent on school security in the wake of the Dunblane massacre of which local authorities will be expected to provide 40 per cent.

In addition to the Pounds 830m earmarked for state and independent schools, there is Pounds 40m for further education and Pounds 100m for the universities. However, there are to be cuts in the planned spending on Training and Enterprise Councils and the grant to the Teacher Training Agency.

Ministers have also revised spending on the nursery voucher scheme due to be introduced in April. Mrs Shephard said the results of the pilot scheme suggested that the take-up rate is likely to be in the region of 92 to 97 per cent and the spending forecast has been cut by Pounds 76m. However, Labour said the reduced plans for nursery provision showed the Government was not guaranteeing places for all four-year-olds.

Tony Blair, Labour’s leader, protested that Mr Clarke had carried off a “Tory trick” on school spending. The local authorities, he said, had spent Pounds 800m more than the spending assessment set in the last Budget. The real increase, he said, was less than the rate of inflation.

In turn, the local authorities responded angrily to Mr Clarke’s claim that they have been reluctant to pass increases in the standard spending assessment on to schools. He told MPs: “It is no good local authorities campaigning for more spending on education in the autumn and then spending their money on other things in the spring.”

According to Alan Parker, education secretary of the Association of Metropolitan Authorities, the accusation was a travesty of the truth.

Local authorities will not be able to judge the full impact of the rate support settlement until the level of teachers’ pay is set in February next year. The Chancellor is insisting there should be no increase in the pay bill, though on past experience, the pay review body is more likely to recommend a rise in line with inflation.

Mrs Shephard said she was expecting the pay body to recommend an “affordable” award, but she refused to make any commitment on funding the pay rise. Councils are not expecting to make teachers redundant, mainly because the number of pupils is predicted to rise by 54,000, mainly in secondary schools.

The assessment of David Whitbread, education secretary of the Association of County Councils, is that ministers have carried out an exercise in cutting as much as they dare, while making sure they cover the increase in inflation.

“It is not as horrific as the settlements we saw in the early years of the decade, when we were only being given increases of around 1.5 per cent to take account of inflation and rising pupil numbers.