NOT many governments have performed so many contortions as we have seen on the funding issue. The colour of the present administration’s money will not be seen until the autumn. But it is clear already that Charles Clarke’s July statement was the product of enormous inter-governmental debate.

One result is a guarantee of a minimum reasonable per-pupil increase for every school. This is an unheard of move towards central direction. Yet it is only a short-term solution. Local education authorities continue to have freedom to switch money intended for education to other services. The damaging impact this has on schools is only prevented by extra cash handouts paid direct from Whitehall.

LEA administration costs have to be brought under control. The viability of a number of small unitary LEAs is being seriously questioned at a time when regional government could lead to more such unitary LEAs.

I can understand the political difficulties in the way of a national funding formula. But undoubtedly the time will be right for such a formula after the Secretary of State’s two-year funding deal has expired.

The present funding system is straightforward. It is calculated using a pound;- per-pupil methodology with a basic entitlement plus top-ups for additional educational needs and area cost-adjustment. It can readily be replicated at school level. This would provide a core entitlement budget for each school.

In the medium term this would provide a budget, which could be added to, but must reach schools without top-slicing (LEAs taking some of the money to use for other purposes) and would be the basis of school funding. In the long term this would produce a national funding formula budget received by each school directly.

The two-year funding deal should not blind us to the defects of the current system. Many LEAs did not provide school-level floor protection to “losers”. Their funding formulas did not reflect national funding factors yet were meant to deliver to schools the missing standards funds and pension changes. Disproportionate increases were given to retained funding, including high-cost special educational needs. The new school forums, established to oversee local school admissions policies, were not able to carry out their scrutiny function on their LEA funding formula and budget statements. Costs of LEA services to schools were increased well above inflation.

Schools genuinely believed that there was to be extra funding this year.

But they see themselves as once again just getting the residue after others have top-sliced for national and local priorities. Schools operate in a national context: national curriculum, testing, comparative tables, inspection and pay rates. Pupils and parents are entitled to expect that schools will meet high national standards. But schools have no national core entitlement to funding. Schools have welcomed the school standards grant as the one bit of funding that comes directly to them with no top-slicing.

Does this mean that LEAs should be cut out of the agenda? No. But it would mean a radically re-focused role. Some have argued for a funding agency for schools to replace LEAs.

A national funding formula generates fierce passions, but the vast majority of heads believe this to be the only viable way forward. Political pressure to move to such a formula will be unstoppable by 2006. It would be prudent to plan for it now.

David Hart is general secretary of the National Association of Head Teachers