A payment-by-results national funding formula for grant-maintained schools could be introduced by a Tory government after the general election.

For ministers want to cut the last ties opted-out schools have with their former local authorities.

They want to free them from funding decisions made by LEAs and believe that rewards linked to achievement could be a powerful lever to improving standards. The link between performance and funding has been established for some time in the further education system.

Incentives for a school system could be based on a snapshot of pupils’ achievements in reaching a minimum grade in key examinations such as English language, mathematics and science.

Alternatively, change in a pupil’s performance could be measured over time and the value added by the school calculated by comparing the difference with the change across the GM population as a whole.

Grant-maintained schools have long pressed ministers for a national funding formula. They argue that it would be consistent with the existence of the national curriculum, the national code of practice on special educational needs, a national pay scale for teachers and a national system of school inspection.

Both the Department for Education and Employment and the Funding Agency for Schools - the quango which administers GM finance - have been working on a national formula.

But in the past Gillian Shephard, the Education and Employment Secretary, has shied away from introducing one as it will inevitably produce winners and losers.

In September, however, John Major said that national funding was the way forward for grant-maintained schools in the long term.

The long term would now appear to be post-election, and Robin Squire, schools minister, this week launched a discussion paper on a national funding formula.

The formula is aimed specifically at GM schools, and Government has no plans at the moment to extend it to LEA-maintained schools.

Mr Squire said a national funding formula was a natural next step from the common funding formula, which is operating in 23 local authorities, where at least 30 per cent of secondary pupils attend GM secondary schools.

Arrangements for the common funding formula vary between areas but centre on a common core which delivers the majority of funding.

This core is linked to the standard spending assessment - the Government estimate of what should be spent in a LEA - and then adjusted to take into account historic funding linked to local management schemes.

Ministers argue that a national formula would ensure that GM schools received grants calculated on the same basis, regardless of local arrangements for LEA-maintained schools or spending decisions taken by their former local authorities. Opted-out schools already receive formula allocations for capital grants from the FAS - Pounds 12,000 per school plus Pounds 24 per pupil, with a minimum allocation of Pounds 17,000.

And, said Mr Squire: “Replacing local arrangements with a standard system would enable grant-maintained schools to better understand how their budgets are calculated. It would also make grant-maintained funding entirely independent of the decisions made by local authorities.”

But Mr Squire acknowledged that it would produce winners and losers. “Every system, whatever formulae are used, will have winners and losers. I don’t think any formula could be devised by man or woman to end the arguments over school funding.”

DFEE projections based on 383 GM secondary schools funded under the CFF in 1995-96 show that 7 per cent of schools would lose out by more than 10 per cent, while 11 per cent would gain by more than 10 per cent.

The greatest positive change was of 17 per cent and the greatest negative change 22 per cent.

GM schools in Barnet, for example, might face a cut in grant of 7 per cent on average, while those in Bromley might gain by 3 per cent.

In the London borough of Lambeth, opted-out schools could face a reduction of nearly 17 per cent, while in Lincolnshire they could experience cuts of 10 per cent.

Gloucestershire GM secondaries, however, might get an increase of 13 per cent and those in Sutton could be 11 per cent better off.

Within individual areas there could also be wider variations of winners and losers.

In Cambridgeshire, where schools stand to gain an extra 0.6 per cent, one school could have its budget cut by 8 per cent.

In Hertfordshire, where schools could gain by 4 per cent, one school would lose out by 16 per cent, and in Surrey, experiencing an overall gain of 1 per cent, one school could face a reduction of 22 per cent.

Martin Rogers of Local Schools Information, a local-authority-funded body, said: “The gainers are not going to make a great deal of noise, but the losers - and let’s face it, GM schools are not accustomed to losing - will squeal like stuck pigs.”

Copies of National Funding for GM Schools can be obtained from the DFEE Publications Centre, PO Box 6927, London E3 3NZ. Telephone: 0171 510 0510. The deadline for commentsis September 23