SCHOOL budgets in one in four local education authorities will rise by barely enough to keep up with inflation and rising pay costs next year, new government figures reveal.

Despite Chancellor Gordon Brown’s summer announcement of record spending increases for education, 36 of England’s 150 local authorities will receive a rise of only 3.2 per cent per pupil in core funding in 2003-4.

Government forecasts put inflation alone at 2.25 per cent for the coming financial year. Added to this is the rising teachers’ pay bill - the bulk of any school’s budget - which jumped by 4.1 per cent this year.

However, 49 councils, many of which have traditionally been relatively poorly funded, are to get increases of 7 per cent per pupil, leading them to applaud the new funding system as fairer and a “brave” step forward.

The figures have been revealed after school standards minister David Miliband announced the Government’s response to a two-year review of the way local authority education budgets are calculated.

Ministers have devised a formula under which local authorities are allocated a basic amount per pupil, plus extra for special factors including deprivation and living costs.

The new system goes some way to addressing a long-running cause of discontent. Funding differences led to schools in some parts of the country, particularly shire counties, receiving thousands of pounds less per pupil than those in others.

Now the tables have been turned and most of the 36 “loser” authorities are in the South-east. Ministers have given larger rises to London and the North. South-east councils are thought to have lost out as the Government has reformed the controversial “area cost adjustment” system, under which authorities in London and the Home Counties get millions of pounds extra to reflect higher costs.

There are some anomalies, however. Leicestershire, the second-lowest funded at primary level, received only a 3.2 per cent rise.

The figures do not necessarily represent what schools will actually get, only what ministers think they should. Councils are free to give extra to their schools, but only by taking cash away from other services or increasing council tax.

Peter Clarke, chairman of the F40 campaigning group for lower-funded councils - many of whom are “shire” counties - commended the Government for “bravery”. Mr Clarke, a Labour councillor from Gloucestershire, said:

“Councils only getting 3.2 per cent are simply going to have to make some hard choices as others have had to.”

But Ken Thornber, Conservative leader of Hampshire County Council, which received only a 3.2 per cent per pupil rise, said the changes were politically motivated to put funds in Labour strongholds.

Most authorities will see rises bigger than 3.2 per cent. Education Secretary Charles Clarke revealed that, nationally, funding for local authorities will increase by 6.5 per cent on average to pound;24.4 billion. Average spending per pupil per year will have risen by pound;1,000 in real terms between 1997 and 2006.

A pledge to enable all local authorities to provide nursery schooling for all three-year-olds will cost pound;300 million.

The total local-authority allocation adds an extra pound;500m to the figures announced in the summer, as ministers have cut the funding for ring-fenced Standards Fund schemes and given more cash directly to headteachers.

At least 14 ring-fenced projects will be axed by 2006. From 2005, schools will have to find the pound;2,000 “threshold” peformance-related payments for experienced teachers from their own budgets.

Ministers have given themselves powers to force local authorities to pass on rises intended for education to schools. The National Union of Teachers criticised the Government for rejecting the idea of special grants for councils facing a sudden influx of refugees.

* Local authority budgets in Wales will rise by 6.2 per cent on average next year, though this covers all council responsibilities, including social services. There is no specific allocation for education, and funding formulae in the principality have remained unchanged.

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