A new government push to reduce schools’ budget surpluses could see the money they have saved leaving education to pay for other children’s services.

Ministers want some of the pound;2 billion sitting in school bank accounts to be used to fund their plans for earlier intervention in the lives of disadvantaged children and more partnership-working between local children’s services.

And they are threatening “stronger action” if schools and local authorities fail to co-operate and reduce what they describe as “unacceptable” sums of money put aside by schools.

The warning will alarm heads trying to plan for a tougher financial climate with tighter settlements expected from 2011.

John Dunford, Association of School and College Leaders general secretary, said that “a lot of rubbish” was talked about school budget surpluses.

He said it was a mistake to fund policies aimed at the whole system from surpluses that only needed reducing in a minority of schools.

Partnership funding for all schools

Chris Keates, NASUWT general secretary, said all schools needed funding for partnerships whether or not they had surpluses.

“We would prefer to see something that actually discourages huge balances being built up in the first place.”

But local government officer leaders welcomed the renewed attempt to ensure that money lying in school bank accounts is spent.

The move is revealed in a little-noticed section of this summer’s schools white paper that says the Government intends to “support and challenge schools and local authorities to reduce school surpluses to more appropriate levels, including using surpluses to pump-prime partnerships and early intervention systems”.

A spokeswoman for the Department for Children, Schools and Families told The TES that its plan to cut school surpluses might see the unused money fund non-education children’s services, though only if the schools agreed.

“Schools already have a responsibility for all the outcomes of pupils in their school,” she said.

“It’s about several organisations, including schools, which have responsibility for children’s outcomes working together to improve those outcomes using the resources at their disposal.”

In November 2007, the Government backed down on a plan to force local authorities to redistribute 5 per cent of all surplus balances held by schools in their area.

But the white paper warns: “It is unacceptable that schools continue to hold on to significant surpluses, which should be spent on improving children’s outcomes today, and we will take stronger action if surpluses are not reduced.”

John Chowcat, Association of Professionals in Education and Children’s Trusts general secretary, said: “The Government is justified in throwing the spotlight on this issue.

“Many schools will find this uncomfortable because they see this as rainy day money. But we have some important priorities for the system as a whole that need funding.”

Dr Dunford said: “A school may be wanting to hold more money in surplus for the rainy day that everybody knows is in the offing. In most spheres that is what is called good budget management.”

Local authorities already have the power to redistribute pound;592 million in “excessive” school surpluses - more than 5 per cent of a secondary’s annual income or more than 8 per cent for a primary. When this happens, the money has to go to other schools.