Tens of thousands of teachers will miss out on their expected pound;1,000 performance pay rises if the Government's funding rescue package is to stand any chance of success.
This week, as Education Secretary Charles Clarke outlined plans for a guaranteed 4 per cent increase per pupil, it became apparent that ministers will push through controversial plans to slash the number of experienced teachers progressing through the upper pay spine by two-thirds.
Mr Clarke also used his announcement to place the onus on balancing the budgets of the worst-hit schools firmly on heads and local education authorities, appearing to acknowledge that more staff cuts were inevitable.
The School Teachers' Review Body is due to give its verdict next week on ministers' plan to allow only 30 per cent of the 100,000 eligible candidates to reach level 3 of the performance pay scale in 2004.
Mr Clarke has refused to pre-empt its conclusions, but funding plans allow for only 30,000 rises.
To pay for the 90 per cent of candidates who have previously moved up the upper pay spine would cost around pound;100 million and virtually wipe out the pound;120m transitional funding promised to the hardest-hit councils this week.
At the centre of the funding package was a guaranteed minimum of 4 per cent per pupil increase for schools with static numbers. Schools with increased numbers have been guaranteed at least 3.4 per cent. Schools with falling rolls would receive an increase greater than 4 per cent to help cover fixed costs.
But Mr Clarke warned: "The number of primaries with reduced cash budgets - and so possibly staff numbers - will be significant, since there are around 50,000 fewer primary pupils this year."
"Responsibility for balancing budgets rests with schools and LEAs," he said. He had given authorities new flexibility to target resources and it was up to them to use it, he added.
Around one-third of LEAs, who would otherwise have received the lowest increases, will share pound;120m next year providing they show how school budgets will balance by 20067.
But many of the schools with large deficits fall outside these areas. Other LEAs will be able to apply for an advance on Department for Education and Skills grants to help schools. But this will be limited to maximum of either pound;300,000 or 0.2 per cent of the authority's education budget.
Barnet, in north London, where schools have a combined deficit of pound;1.7m, would only receive an extra pound;364,000 based on this year's budget of pound;182m.
Mr Clarke seemed to suggest that cutting staff should be the solution.
"Where spending varies significantly from the average - where 80 per cent is spent on staff costs - they need to get back into balance."
Management consultants KPMG will be brought in to train hads to "manage their resources effectively".
Sir Jeremy Beecham, chair of the Local Government Association, said the deal was good news for many schools. David Hart, general secretary of the National Association of Head Teachers, said it was an attempt to stave off job losses before the election, but time would tell if it was enough.