Good candidates will refuse to take over such schools, where they are most needed, unless the rewards reflect the task, according to a report by the National Association of Head Teachers.

It calls for heads at such schools to get a minimum five-year contract and for bonuses to be paid depending on performance.

The report, Headteachers at the cutting edge of educational improvement, comes after a pay award which once again tied heads’ pay to that of classroom teachers.

The School Teachers’ Review Body has also signalled that some senior teachers could lose management allowances - worth up to pound;10,000 - after evidence suggesting that they are being used simply to boost salaries. Over half of teachers now get the allowances.

Independent research for the review body will examine the use of the allowances in schools, although the review body says any reform will happen only after workload reforms are implemented.

In a separate finding the review body has endorsed the idea that the controversial leadership incentive grant could be used to pay recruitment and retention incentives to ordinary teachers. The pound;375,000 grant for challenging schools provoked anger after ministers suggested it could be used to pay off “poor” heads.

For once, both heads and local authority leaders believe that there will be enough cash to fund the pay award. Many authorities had budgeted for a rise of 3 to 4 per cent.

But heads said that London schools will have problems paying for their higher deal. Boroughs such as Newham, which pay inner London rates but get outer London funding, will be hardest hit.

Management allowances, 29