The Government intends to delegate as much funding as possible to schools,which in practice could see local authorities devolving up to 98 per cent of education spending.

The proposed changes mean schools will now be given money currently held by local authorities for school meals, advisory and inspection services, instrumental music, library and museum services, staff costs (including supply cover and training), insurance, structural repairs and maintenance and provision for ethnic minorities (excluding Section 11 money).

Councils will be left to run core functions such as transport, education welfare and psychology, special needs and school effectiven ess.

During the committee stage of the School Standards and Framework Bill Stephen Byers, the school standards minister, said: “We believe the prime responsibility for raising standards must rest with individual schools and classroom teachers. [They ] can be helped by supportive local authorities to raise standards, but the prime responsibility must be at school level. That means that, whenever possible money must be delegated down to schools.”

He said that the Bill would ensure limits and restrictions were put on any local authorities’ hold- back on services.

George Phipson, chair of the Association of Heads of Grant Maintained schools, said: “It is interestin g the Government is keen to learn from the GM experience and is offering other schools the benefit of greater delegation. There is no doubt more money in schools leads to improved standards. The move towards a mixed economy approach - bringing together the best of both systems - must be good for schools.”

He said former grant-maintained schools would be able to avoid some teacher redundancies if the percentage clawed back by local authorities was kept to the minimum.

David Hart, general secretary of the National Association of Head Teachers, said schools would welcome having more money in their budgets, provided it covered the extra services they would have to provide.

He said schools would be most concerned about taking on school meals and structural repairs and maintenance, because they would lose the economies of scale enjoyed by local authorities.

David Whitbread, education secretary of the Local Government Association, said: “We agree with the idea of trying to define the role of the local education authority and the role of the school, but the mistake is to squeeze the local authority role and be too driven by the desire to maintain what used to be the case in the grant-maintained sector. This will perpetuate the market approach to education services - the raison d’tre for GM.

“Also if you take away money from local authorities to try out new schemes locally you can stifle innovation throughout the system.”

He said council-run services, such as field centres or help for orchestras, would be lost if some schools decided not to contribute.

Ministers say the level of hold- back varies enormously. Mr Byers compared Bournemouth which delegates 85 per cent of its budget to schools, to Dudley which delegates 96.3 per cent.

In a Commons written answer, Mr Byers listed extra amounts per pupil per year if local authorities achieved the Dudley level. In Bournemouth this would be #163;214, while in the London borough of Camden, it would be #163;233.

Peter Metcalfe, senior assistant chief education officer of Dudley, said while 96.3 per cent was delegated, the authority met heads to decide which services it would provide. Once agreed, all schools must sign up.

“It gives heads more control over services,” said Mr Metcalfe.

A Department for Education and Employment working group on the new funding arrangements has yet to finalise its report.