THE GOVERNMENT is preparing to cut schools’ annual funding increases to ensure they reduce spending on everything from maintenance to photocopy paper.

A consultation paper, published this week, proposes for the first time to force schools to achieve the same “efficiency gains” that the Chancellor has demanded of government departments.

“We would expect schools to be able to start making efficiency savings immediately,” the Department for Education and Skills funding paper said.

The Schools’ Minimum Funding Guarantee, which guarantees a 3.7 per cent funding increase for every pupil this year, would for the next three years be set lower than schools’ anticipated cost increases.

That funding is drawn from the pound;28.1 billion dedicated schools grant - four-fifths of all school funding - which the department also proposes to rein in.

On top of that, the DfES wants to penalise schools that stockpile funds from one year to the next, including those planning for big building projects or insuring themselves for unexpected costs.

All schools would be levied 5 per cent of their excess end-of-year bank balance every year, which would then be redistributed by local authorities to schools with less cash.

Last year, schools stashed away pound;1.6 billion for a rainy day. The proposed levy would have clawed back about pound;75 million of that.

A department official acknowledged that there would be “debate” about the new financial constraints, precise details of which are to be announced by the end of the year.

That debate is likely to begin today at the Association of School and College Leaders’ annual conference.

Malcolm Trobe, association president, defended the right of headteachers to save money for projects such as a new hall or gymnasium. He called on the Government to guarantee that education spending would increase fast enough to more than cover schools’ rising costs.

In Gordon Brown’s budget this month and the comprehensive spending review this summer, the Government will try to keep teachers’ pay rises below inflation and press other spending down.

Jim Knight, schools minister, said the Government remained committed to above-inflation increases in school funding, after real-terms increases of 55 per cent per pupil since 1997.

But, he said, it was considering a lower minimum funding guarantee because a higher level of funding would mean less room for the Government to deliver other education strategies that had been demanded.

On the subject of stockpiling funds, he said that it was increasingly hard to justify when the Government was already working to rebuild and refurbish schools.

“We give them money to invest in education, not to put in the bank. And I just think that when it gets to a scale of pound;1.6 billion, we have to ask some questions,” Mr Knight said.

The DfES has also proposed more high-tech measurements of poverty to target funding at schools in areas of deprivation that are being missed out.