A rural suburb of southern London for those who can afford it is how the Rough Guide to England describes it. And why not? Surrey has a profoundly middle-class, stockbroker-belt image - all Green Belt and mock Tudor, a place where commuters can forget about the office and where John Betjeman’s beefy girls called Pam excel at tennis. Its roads and rivers have flowed into London for centuries and the capital has repaid the compliment by sending its citizens to lose their money at the races or spend their time in the royal parks or on the river.

Close to the metropolis and between two international airports, Surrey attracts high-value companies such as Siemens, Phillips Research and McLaren Cars. A quarter of its workers are in the information industry, while managers and administrators form the largest single employment category and there is a significant research and development element. Unemployment is below 1 per cent.

People here are high achievers. Over half the labour force has two A-levels and one-third has a degree. Independent schools claim 22 per cent of children, but despite possible “creaming off” Surrey is still one of the top performing authorities at key stages 1, 2 and 3. It is 10 per cent above the national average at KS4.

Contrary to its image, Surrey is not homogeneously white and middle class. The north of the county borders London boroughs such as Hounslow and shares many characteristic urban problems. And there is a wide ethnic range - at one school in Woking, 99 per cent of parents speak English as a second language. And two of Surrey’s most pressing educational problems are the result of its wealth: it has the lowest per capita central government grant in the country, so teachers can’t afford to live there, and it qualifies for very little funding from such schemes as Excellence in Cities or the European Social Fund. It recruits enough young teachers and invests in supporting them very well, but they often leave after three or four years.

Teachers get London fringe allowance, but housing often costs more than in parts of inner London. Transport can be difficult too. Kay Hammond, the Conservative executive member for Children and Young People, says the county council has been working hard to lobby the Government and would like Surrey to be considered an outer London borough. Recruiting overseas and supporting such staff to attain qualified teacher status and up-skilling returners helps to plug some of the gap.

Financial measures are offered such as mortgages, rented accommodation, even loans to schools to refurbish housing originally intended for caretakers. “It was almost meltdown a year ago,” admits Dr Gray. “We got through it, but it’s my biggest worry.”

But there are other financial issues. Under proposed changes in funding, Surrey could lose up to pound;60 million from its grant next year.

“There’s an anticipation that more money will go up the M1 to the North,” says Kay Hammond. “But we have a large traveller population. We have asylum-seekers, children with multiple needs, a high incidence of autism - we’re not getting sufficient money to deal with complex needs. The Government should give us a fair crack of the whip to deal with statutory responsibilities.”

Yvonne Lawrence, chair of the Surrey Primary Headteachers’ Council, believes schools also face higher costs than those elsewhere for items such as grounds maintenance and cleaning, as these workers struggle to make ends meet.

In the face of such problems, schools are coming together in associations of headteachers and in geographical clusters. “Although we’re in a competitive environment, we are stronger working together,” says Bob Linnell, chair of Secondary Headteachers’ Council. “We’re a very pro-active group of schools.”

Yvonne Lawrence is positive about the development of local federations. She enjoys the diversity and “rich feedback” of Surrey schools, and the authority’s policy of working alongside schools and other partners, such as the local diocese. “It feeds down into the workforce, working for the good of all,” she says.

Surrey’s image may be conservative, but it is keen to embrace change. From his enclave in Kingston - local government reorganisation in 1964 left county hall marooned in the neighbouring borough - Dr Gray is enthusiastically reorganising the authority. Working with the DfES’s New Model LEA initiative, Surrey education service has undergone huge reorganisation into four activities.

Planning for Learning will support elected members on strategy. Dr Gray describes them as a small group of people at the core who provide the “glue” holding the services together. An integrated Children’s Service will combine social services and education and provide a single point of contact for families and schools to give them support and advice.

Community Services will include adult education, youth service, libraries, cultural services and lifelong learning, and will be a key partner in the new Connexions advisory service for young people. The Surrey Schools’

Support Service (FourS), once operating from seven locations but now together under one management, covers issues such as curriculum, personnel, finance and governors’ support. But in times of delegated budgets, LEA services are vulnerable to competition from the private sector. “Within a three to five-year period, there will be a small number of very large providers of school support,” says Dr Gray. “We’re not into selling off our business, so the model will be a Surrey-created joint venture.”

FourS is negotiating to find a private partner. Thirty organisations have bid, but no decision will be made until next February. By keeping the business and expanding their services to a wider market outside the county, staff hope to protect their jobs and the core services.

And this is unlikely to be the last reform. “I like to think Surrey is recognised as a very forward-looking county,” says Kay Hammond. “The 2002 Education Act was influenced by things we’ve done here, such as the power to innovate and to look at local issues.”