COUNCILS this week claimed that ministers are planning to wrest control of education spending away from them - giving the cash directly to schools - as part of a radical shake-up of local authority finance.
The move is expected to feature in a Green Paper to be published this summer and follows hot on the heels of the Budget which put nearly pound;300 million directly into the hands of headteachers.
It would severely damage the powerbase of local authorities as education spending makes up the bulk of council budgets.
The Local Government Association, which represents 172 councils in England and Wales, has warned that schools cannot be properly run by Whitehall.
Sir Jeremy Beecham, its chairman, said the Government would face stormy waters if decisions on education cash were made without a proper review of the balance between local and central roles.
"We need a settled view of the responsibilities of LEAs in meeting the needs of children and parents as well as being able to drive up standards based on local partnerships between councils, schools and the private sector."
But David Blunkett, the Education and Employment Secretary, is determined that the extra money from the Government gets into schools and has been stung by criticism that councils have een holding it back.
A dozen ministers, including tMr Blunkett and the Home Secretary Jack Straw, met leading members of the LGA last week to discuss funding.
Ministers are now considering reform options, including improving the formula-based approach and simplifying the formula that is used.
A spokesman for the Department of the Environment, Transport and the Regions said change was several years ahead and that it was too early to set out options.
The highly complex nature of the present system with its standard spending assessment and five education blocks - under-fives, primary, secondary, post 16 and "other" - has been regularly criticised.
Last month Chris Woodhead, the chief inspector of schools, added his voice to the gathering campaign to end the huge funding disparities between schools.
The two headteacher unions, the Liberal Democrats and the School Teachers' Review Body have also all made the case for a national formula.
Many hope last week's Budget decision to put up to pound;9,000 in the hands of primary heads and give up to pound;50,000 to secondary heads will spearhead such a move.
And while the LGA welcomed it as a one-off, it is less happy at the prospect of it becoming the future pattern for funding.
"The way forward is through local partnership and modernisation, not government centralisation in London," Sir Jeremy insisted.