“Finances are managed efficiently with the budget linked to educational priorities,” said the Office for Standards in Education team in February 1996. “Existing resources are used well and nothing is wasted. Overall the school provides good value for money.”

A year later, OFSTED has named the Peterborough school as one of 74 primary schools in which pupils achieve “high standards” in literacy and numeracy and make an “excellent” start to their education. Yet this week headteacher Liz Waterland was forced to sack one nursery nurse and one reception teacher thanks to an estimated Pounds 27,000 cut in her Pounds 300,000 budget.

“It’s bloody ironic, isn’t it?” she says. Cambridgeshire County Council argued strongly for a bigger standard spending assessment but the Government was unmoved. Mrs Waterland, who is repeatedly referred to in the OFSTED report as a strong leader, first told her staff about being named as an excellent school and saved the bad news for another meeting.

“All the time it is made harder,” she says. “More paper-filling, fewer people to do it, more demands on the curriculum, more children coming to school disadvantaged and fewer people to help them, fewer resources to offer them. ”

The school’s nursery, which is also covered by the “excellent” rating, could easily double its intake to 104 children. At least, the waiting list is long enough, but there is no money and no space.

And there’s another irony. Mrs Waterland is well-known in early-years circles for her beliefs in the “real books” approach to reading and the child-centred approach to education, two concepts which are an anathema to Chris Woodhead, the chief inspector of schools.

Brewster Avenue, which neither uses a reading scheme nor teaches phonics first, has succeeded in achieving an excellent inspectors’ report despite OFSTED. Or to use Mrs Waterland’s words: “We achieved in OFSTED’s terms without having to dilute our philosophy to meet the pressures from some quarters for more formality and less child-centredness.” The essence of the school’s policy on reading is: “Experience precedes understanding and understanding precedes technique.” This means that children learn about books before phonics. They are sent home with children’s literature and the school holds parents’ meetings to explain how they can support and help their children’s reading.

The school believes that children need to understand the purpose of reading before they are ready to learn technique. Mrs Waterland is full of praise for her staff who, she says, are “very experienced” in early-years education and work “extremely hard”.

But she also has some telling words about Brewster Avenue’s 235 children, who live in the surrounding Victorian terraces. “We have got lovely children. They are eager and out-going children who have got a lot of potential and a lot of reasons to come to school, and most of them enjoy engaging with school activities.”

There is a high proportion of single-parent families on low incomes in the area but the school spends a lot of time talking to parents and is rewarded with a good number of parent helpers.

One of OFSTED’s main findings touched on this point: “This is a good school which is highly regarded by governors, parents and children. The school is well led by a headteacher whose leadership places a strong emphasis on providing a caring atmosphere in which children feel secure. Staff are supported in providing a steady improvement in the standards of children’s achievement. There is excellent support from many adults in the community which extends the educational opportunities provided by this successful school.”