More than three-quarters of schools are at risk of “diluting” the benefits of the pupil premium by using the cash to help all children rather than the most disadvantaged, the National Audit Office has said.

A report published today by the government spending watchdog concludes that 77 per cent of schools are spending the money on all pupils, meaning that some of the poorest children miss out on the “full benefit” of the cash.

The study also shows that some of the most disadvantaged schools in the country suffered a drop in funding of more than 5 per cent between 2010-11 and 2014-15, despite the extra pupil premium money.

The report coincides with another pupil premium report published by the Sutton Trust and the Education Endowment Foundation, which calls on the government to reward schools for using the cash effectively.

The pupil premium is additional money given to all schools for every child they have that has been in receipt of free school meals over the past six years.

According to the National Audit Office’s report, the premium could bring about significant improvements for poorer children but its impact is being watered down by an over-reliance on “high cost” approaches.

The report found that the money - worth £1,323 a year for a primary pupil and £935 for a secondary student - was having an effect on narrowing the attainment gap between the wealthiest pupils and their poorer classmates.

But it concludes that not all disadvantaged pupils attract funding and some schools do not use the funding appropriately. It adds: “Most importantly, there is a risk that accountability and intervention mechanisms allow schools to waste money on ineffective activities for many years without effective challenge.”

It says that:

• 72 per cent of schools provide individual tuition, an effective but costly approach;
• 63 per cent have sought to improve feedback which is effective and cheap;
• 71 per cent employ extra teaching assistants, which is high-cost and only effective in certain circumstances.

Meg Hillier, chair of the Public Accounts Committee, said: “It’s welcome that since the introduction of the pupil premium, headteachers and school leaders are now more focused on improving outcomes for disadvantaged children, but it should be a matter of concern that some schools are not spending this funding in a cost-effective way.”

Polling commissioned from the National Foundation for Educational Research, by the Sutton Trust and EEF, shows that half of primary teachers and 44 per cent of secondary teachers feel the premium is being used to fund activities that would otherwise have been cut because of pressures on school budgets.

Sir Kevan Collins, chief executive of the EEF, writes in the report: “The history of education is strewn with plausible sounding ideas that turned out to be red herrings, or that worked wonders for a term before falling by the wayside. But putting in effort to evaluate and embed change is worth the effort. There is a great prize on offer: a consistent and school-led system providing better outcomes for our children.”

The report argues that the pupil premium should continue to be paid on the basis of disadvantage, without discrimination between low and high attainers. The Fair Education Alliance has argued that the money would be better spent on helping those who start school with low levels of attainment.

Education secretary Nicky Morgan is due to speak at a Sutton Trust and EEF summit on the future of the pupil premium tomorrow, along with Ofsted’s chief inspector Sir Michael Wilshaw and pupil premium champion Sir John Dunford.