Brian Wilson, the Education Minister, acknowledged that this represented only a start to make good the shortfall in educational spending but said it was “serious money to address serious challenges”.

Directors of education, however, have expressed fears that the benefits could be wiped out by next year’s spending reductions. John Stodter, director in Aberdeen, said the city’s finance officials estimate cuts of Pounds 20 million. Donald Gorrie, Liberal Democrat education spokesman, described the money as “a drop in the ocean”.

The lion’s share of Pounds 115.7 million in capital expenditure will go to improving the school building stock where an accumulated backlog is estimated at Pounds 200 million in repairs and maintenance. The sum will also be used to improve facilities for information technology and is to be spread over the next five years. The first tranche of Pounds 8.9 million must be spent in this financial year, followed by Pounds 26.7 million in each of the ensuing four years.

All councils will have access to this cash under the local government spending formula, ranging this year from just over Pounds 1 million for Glasgow to Pounds 57,000 for Orkney. It is, uniquely for capital expenditure, to be paid as a specific grant, requiring regulations to be laid before Parliament.

The extra money includes Pounds 59 million as a one-off payment in 1998-99 for general revenue spending. A Scottish Office spokeswoman confirmed earlier indications that this element is to be spent on “raising school standards”, which have yet to be defined, but can also be used for IT and school buildings.

There is no indication that the revenue allocation is to be ring-fenced but councils will be expected to account for how they spend the money. A circular this week stated: “The Secretary of State will be keen to be able to identify what has been made possible by these funds.”

The circular said the Pounds 59 million should help councils make “significant progress” towards implementing the Government’s priorities. “The Secretary of State wishes to ensure that these resources have maximum impact in the classroom,” it adds. But the Scottish Office stresses that, while the early years are among those priorities, the money announced this week is additional to the Pounds 24 million early intervention grant it has allocated over three years to boost literacy and numeracy standards in primary 1 and primary 2.

The announcement also covers an extra Pounds 30 million to be made available to councils for next year only. Half will be distributed normally to encourage authorities to “spend to save”, while the remainder will be a “sweetener” for a limited number of councils that want to close schools but need to invest in others to win over parents. Applications for “rationalisation support”, most of which is likely to go to Glasgow, have to be in by September 30.

The circular says councils should target capital allocations on buildings in poor condition, replacing outside toilets and other external accommodation, and adapting buildings for educational use such as pre-school provision. It suggests councils should carry out a systematic survey of their school building stock.