Local management of schools was allowing heads and governors to save money, while at the same time making teaching staff redundant, conference delegates were told.
General secretary Nigel de Gruchy called the system "corrupt". He said:
"This money is being used as a slush fund by heads and governors to allow heads to pay themselves discretionary rises."
Schools underspent by nearly pound;546 million last year, almost 4 per cent of their budgets, says the union, and more than the Government has spent on reducing class sizes.
Delegates supported a motion condemning LMS.