Charles Clarke wants to draw a line under the funding crisis which has contributed to growing disillusionment with the Government, as shown in opinion polls.
The Education Secretary promised that every school would get an increase in funding per pupil next year and "stability and certainty" over future funding.
The extra money comes from money not spent by the Department for Education and Skills in previous years. It will be used to save Standards Fund programmes that were due to be scrapped as part of a drive to put more money into schools' core budgets. Schools will get pound;400m in 2004-5 and the same the following year.
Other measures aim to make sure more cash reaches schools: these include more central control over how money is distributed and less leeway for councils to raid education budgets to fund other services.
The package was a final attempt to placate heads and teachers before they left for their summer holidays.
Hundreds of teachers and support staff are threatened with redundancy while many more schools have not renewed the contracts of temporary staff or failed to replace those who have left.
The crisis has left heads and teachers wondering if schools will have enough money and staff to implement the deal to reduce teachers' workload.
The National Association of Head Teachers has threatened to pull out of the agreement if it proves unaffordable.
Heads say that another pound;1.5 billion is needed over two years to fund the workload reforms and avoid further job losses.
The shake-up of the funding system from 2004-5 will give councils less power over how money is spent. Mr Clarke also offered his greatest encouragement yet to supporters of a national funding system that bypasses councils.
Graham Lane, education chair of the Local Government Association, said councils were scapegoats for the problem despite spending pound;186m more than the Government says they should have on education this year. He also warned the changes could cut funding for special needs pupils. "Blair wants a simple solution to a complex problem. Downing Street advisers don't understand education."
But Mr Clarke still faces a battle to wrest further funds he needs from Chancellor Gordon Brown. He must also fight over the shape of any future funding system with Deputy Prime Minister John Prescott, who oversees council funding.
Mr Clarke aims to tackle what he described as "systemic" problems with funding. But his approach has been criticised by experts who say higher per-pupil funding could still lead to redundancies - because of falling pupil numbers.
Professor Alan Smithers and Dr Pamela Robinson, at Liverpool university centre for education and employment research, are warning of a "demographic timebomb" resulting in the loss of more than 7,000 primary teaching jobs over the next three years.
Falling rolls will lead to job losses among teachers at a time when schools are being urged to recruit assistants to take classes.
Official figures show primary pupil numbers will fall by 168,000 in the next three years - equivalent to around 7,300 teachers. By the end of the decade a total of 24,000 jobs could be lost across all schools in England and Wales.
Ministers also signalled their determination to peg teachers' pay by recommending a 2.5 per cent annual rise for the next two-and-a-half years and called on heads to slash the number of teachers awarded merit pay increases.
News, 3; Leader, 16