Teachers' jobs are severely threatened by this year's education budget, with more than 14,000 likely to be lost by next summer.
A fifth of schools are expecting to cut posts by July, while a third anticipate losing staff next year, according to a survey commissioned by The TES from Manchester University.
"Affording Teachers", by Professor Alan Smithers and Dr Pamela Robinson of the Centre for Education and Employment Research, surveyed 2 per cent of primary schools and 10 per cent of secondaries in England and Wales earlier this year.
They found schools redistributing their budgets to protect teaching jobs, cutting spending on books, equipment, buildings and repairs to balance their finances. Attempts are also being made to cut costs by hiring cheaper teachers, leading to staff over 50 being increasingly encouraged to take early retirement.
The authors conclude: "If the present level of expected teacher redundancies intrinsically reflected improved efficiency in education it would just about be acceptable. But it seems to be due more to the capricious workings of crude financial formulae. There must be a better way of funding our schools. Perhaps there should be a national figure per child since with national salaries for teachers the costs need not vary by much across the country. The traditional differentials between primary and secondary education should also be re-examined."
The report blames the development of the market in education for many of the financial problems being faced by schools. It points out that although the Government likes to think of schools as businesses run by chief executives and boards they, unlike independent schools, cannot price their services or decide their employees' salaries. And, while funding is on the basis of pupil numbers, children can be worth very different amounts depending on where they live.
Another factor outside schools' control is teacher salaries. "Most headteachers have very little room to manoeuvre particularly in the small primary schools. Unlike chief executives of actual businesses they have relatively little scope for managing the income of the operation. Popular schools usually do not have the room to take extra numbers and lack the money to invest in extra accommodation even though they are now allowed to expand . . . Expenditure is also largely out of the headteachers' control."
The report quotes one East Midlands headteacher: "When there is initially not enough funding to keep present staff and ancillary staff in this school, just an extra Pounds 5,000-Pounds 10,000 would be enough to keep our heads above water. But unless an extra five children appear in time for my Form 7 return on pupil numbers to the Department for Education this will not materialise. Negotiation of salaries is a farce as there is no money in the kitty for posts of responsibility or re-assessment of head's and deputy's salaries."
Another, from the Yorkshire area, added: "Since 91 per cent of our budget is spent on staffing it is impossible for us to make savings by cutting non-staffing costs any further. Inevitably there will be an increase in the pupil-teacher ratio and a reduction in non-contact time."
The report points out that not all schools are in this position: the transition from the old education-authority driven system has created winners and losers. "The formulae allocating the money are inevitably blunt instruments and are as remote from the real costs of running a school as are the Crufts criteria from a real working dog."
The authors say the wish to create a market run on parental choice will only stand a reasonable chance of success if the money following the child accurately reflects the cost of providing the education, plus an element of profit to allow development.
"Another aspect of running schools as a market is that some would be expected to fail. If enough parents did not choose to send their children to a school it would not be financially viable. Some of the schools in our survey seemed to be suffering due to falling numbers so it may be the simulated market is showing signs of 'working'. But what is the policy for dealing with children in a school on the verge of bankruptcy? Are some children to receive the bulk of their education in schools that are being wound down? Are the schools to be cushioned in any way, or closed immediately and the children dispersed?
"Although the market seems a superficially attractive idea for raising the standards and efficiency of schools it is by no means clear that the implications have been fully thought through. Even grant-maintained schools do not approach the freedom of independent schools to generate revenue and set salaries. As it is emerging, formula funding of local authorities and schools seems a great way of passing the buck. Can the formula ever be accurate enough to reflect the true costs of providing education? If not there will always be anomalies and good schools may find themselves handicapped by arbitrarily not receiving enough money."