The number of experienced teachers receiving performance pay awards each year will be slashed by two-thirds as ministers aim to end a culture which allows automatic progression up the salary scale.
Unions were furious about the proposal in the Government's submission to the School Teachers' Review Body to fund rises for only 30 per cent of the 100,000 teachers eligible for a pound;1,000 increase in 2004. Only teachers deemed "excellent" will qualify.
One expert said the changes were too late and would be unworkable. But another argued that private-sector employees would not expect a performance pay rise each year. The current upper pay scale arrangements have seen more than 90 per cent of candidates progress through the first two levels.
Charles Clarke, the Education Secretary, who is anxious to prevent a repeat of this year's funding crisis, said the rate was "unsustainable" and would by 2009 add pound;700 million a year to English schools' wage bills.
Mr Clarke also urged the review body to end automatic progress up the salary scale for teachers in the early years of their career. "We believe that consideration of any extra pay should naturally follow the annual consideration of teachers' performance - and that teachers should understand and accept this," he said.
Nigel Middleton, a performance pay consultant, said the new government criteria would be too late to limit the numbers being considered for the rise in September 2004. Performance reviews would have been set months before the earliest possible introduction of the new system in November.
Mr Middleton, a director of the Head Support consultancy, also said that the proposed new rules would leave heads struggling to defend appeals against their decisions.
"Very few will feel confident to rank order applications fairly when they know that the person who comes eighth out of 25 will get an award but that number nine will not.
"Their defence will need to be based on the quality of evidence available.
But when the rules are only decided at the last minute unsuccessful teachers will inevitable claim they have been treated unfairly."
But Andrew Oswald, professor of economics at Warwick university, said that private-sector workers would not expect all staff to receive performance-related rises.
"I do not think it is reasonable for teachers to move up automatically.
Human beings dislike being judged but it is good for them," he said.
Eamonn O'Kane, general secretary of the National Association of Schoolmasters Union of Women Teachers, said he would strongly oppose the plan. Doug McAvoy, his National Union of Teachers counterpart, accused ministers of acting like conmen.
The proposal for a two-and-a-half year pay deal was welcomed by the two heads' associations.
WHAT THE GOVERNMENT HAS PROPOSED
* A pay deal covering April 2004 to August 2006, allowing subsequent agreements to begin in September in line with the school year.
* A pay rise of no more than 2.5 per cent - projected average inflation rate over that period.
* A drastic cut in the number of experienced teachers progressing to the next level of the upper pay scale.
* Main scale progression to be more closely linked to performance. No limits on numbers proposed.
* A "tighter regime" of management allowances, most of which will be given for three-year renewable periods.
* Bring forward the pay cycle to give schools more time to budget.
The STRB will report on the first three points and the possibility of further regional pay by November 3. A second report will follow, by January 30, on the last two points.