UK schools could have their funding cut by a fifth and still produce the same results, according to a report the Government has used to justify its education policy.

The Organisation for Economic Co-operation and Development (OECD) study says that on average primaries and secondaries are only 70-80 per cent as efficient as they could be.

“A move to best practice would therefore mean that current levels of output could be provided using roughly 20 per cent fewer resources,” it says.

The report on the UK’s economic performance adds that schools will need to become significantly more efficient in the next four years to cope with annual funding increases of just 0.1 per cent.

It also warns that the Government’s pupil premium, designed to encourage schools to admit disadvantaged pupils, may be too low to cover such pupils’ extra costs.

Education secretary Michael Gove highlighted the OECD report last month, saying it backed government reforms on funding disadvantaged pupils, increasing school choice and reforming league tables.

But teaching unions and academics have attacked the OECD’s assertion - in the same document - that UK schools could survive major cuts because “considerable efficiency gains” are achievable.

The Department for Education said that schools needed to be “run as efficiently as possible” and that it had asked them to save pound;1 billion on “back office functions”.

John Bangs, who sits on the OECD trade union advisory committee, said: “I don’t think the OECD does itself any favours with this kind of crude generalisation.”

He doubted whether it had taken into account the pressure of pupil numbers rising, the social need for rural schools and the diversity of pupils in terms of social class and ethnicity.

Russell Hobby, general secretary of heads’ union the NAHT, said: “Some of the East Asian countries have a culture that allows classes of over 50 students without discipline problems. You cannot assume everywhere is the same.”

Professor Tony Travers, a school funding expert from the London School of Economics, said: “This is the kind of thing an economist would say but in reality it won’t work like that. I have visited schools where it is inconceivable that you could cut 20 per cent of the funding without it having an impact on education.”

Professor Alan Smithers from Buckingham University said: “The overall generalisation is simplistic and should be taken with a pinch of salt. But we ought to use this as indication of what is possible in other countries and look to see where we can improve.”

The OECD study also concludes that improvements in UK schools have been limited in the past decade despite “sharply rising” spending, and that “grade inflation could be a significant factor” in improved exam results.

More resources need to be focused on disadvantaged pupils, it says. The pupil premium is a “step in the right direction”, but it is “relatively low” and might not cover their costs.

The study says increasing school choice could be positive but could also lead to greater segregation because disadvantaged pupils are limited by where they live. It recommends a pilot banning place of residence as an admissions criterion for state schools in some local authorities.

But the DfE said it had no plans to do so and added that the pupil premium was a “good settlement” when other public services were facing cuts.

FINDINGS - Numbers game

The OECD based its comments about school inefficiency on 2007 research comparing spending and teachers per pupil in different industrialised countries with their scores in its Programme for International Student Assessment (Pisa) survey.

It found UK schools were between the 10th and 12th most inefficient of 28 countries, with South Korea and Turkey the most efficient.

The researchers calculated that if schools became 95 per cent as efficient as was possible, the UK could get rid of 9 per cent of teachers and still achieve the same Pisa scores.