Instead, the new funding regime will create winners and losers and could eventually see school budgets taken out of local authority control and handed to private companies. A decision is expected in December and the new funding criteria will take effect next year.
Heads have until the end of the month to comment on proposals that were published by the Department for Local Government, Transport and the Regions in July.
A review of local government funding was promised when Labour came into office in 1997, but it took three years for John Prescott's department to produce a Green Paper on the issue.
Proposals were set out in 2001 with the aim of creating a formula that would be "fairer, simpler; more intelligible and more stable".
The Government is proposing to separate the funding routes for schools and education authorities. The schools' stream will receive 88 per cent of the total. There will be a basic entitlement, with top-ups for significant deprivation. Areas where it costs more to recruit and retain teachers will also receive extra. Primaries will benefit from a sparcity top-up, to reflect the higher cost of maintaining small schools in rural areas.
Free school meals will no longer be used as a measure of deprivation. The Government is consulting on several alternative measures, including the number of children with English as a second language, and the percentage of families receiving Family Income Support.
Four scenarios have been produced to illustrate how different areas would be affected. One would see Kent suffer a cut of nearly pound;45 million, while Oldham could gain more than pound;18m.
The body that represents the 40 worst-funded authorities, the F40 group, will not welcome the proposals. Many in the group see little gain in the reforms. Staffordshire would suffer cuts in three of the four scenarios.
Many north-west authorities are also disappointed by proposals which appear to leave them with the status quo. A conference in Wigan on Monday will bring education authorities, teachers and MPs together to discuss the issues.
Conspicuously absent from the consultation paper is the kind of activity-led formula the heads' associations had pressed for. This would begin with a school's actual costs and build a formula in blocks from the bottom up. It would have produced national benchmarks for class sizes and staffing ratios.
Several authorities have been working towards such a funding system and the Education Funding Strategy Group, which advises DLTR civil servants on education isssues, had expected to see it in the final document.
But the consultation paper was issued in July, before the group had finished its deliberations. At its last meeting a few days ago, civil servants made it clear that the activity-led approach would not be recommended to ministers because "the department fears that agreed assumptions would tend to become national norms". This led to a furious stand-off.
The Secondary Heads Association's funding consultant Peter Downes said that schools would be very angry if the approach were abandoned now. "This could be a public relations disaster," he said, adding that the real reason the activity-led formula had been rejected was that "it would expose funding to public scrutiny".
Strategy group representative Jack Hatch, head of St Bede's primary in Bolton, said that a properly worked through needs-led formula could have solved some of the inequalities between primary and secondary schools and eliminated the need for additional funding through the Standards Fund. "But it's obvious that ministers wanted to keep control of that money," he said.
Meanwhile, National Association of Head Teachers finance expert George Phipson pointed out that a separate schools' stream opened up the possibility of a funding route that bypassed authorities. "Once it is separated that makes it easier to route the funds through a new body, perhaps the local Learning Skills Council or even a private company."
He pointed out that, from next year, LSCs will take over post-16 funding for sixth forms. "If the LSC proves to be a decent funding route you can begin to see the LEAs come under huge pressure," he said. "They could be cut out of the picture completely."
The consultation papers can be seen at: www.local.dtlr.gov.ukreviewconsultindex.htm The home page for the Education Funding Strategy Group is at www.dfes.gov.ukefsg email@example.com