Annual rises in funding for schools are likely to be less than half of what they have been in recent years, MPs warned this week.

An education select committee report said it believed that instead of getting between 5 per cent and 7 per cent, schools would in future years receive only 2 to 3 per cent.

It urged the Government to tell schools about lower budget rises so that they can prepare for the future.

The report said the decline in spending increases would be due to a drop in the number of pupils and the Government’s pledge to save pound;4.3 billion from the education budget as part of its drive to cut public-sector costs.

The Government has promised average funding increases of 6.8 per cent per pupil in 2006-07. Primaries will be guaranteed a minimum of 4 per cent per child and secondaries 3.4 per cent. The average increase per pupil in 2007-08 will be 6.7 per cent.

But falling pupil numbers mean many schools will get significantly lower increases in their overall budgets.

At the same time, schools will be expected to deliver most of the pound;4.3bn efficiency savings through more productive use of teacher time and more efficient purchasing of goods and services, rather than actual funding cuts.

MPs were sceptical that savings could be made, despite reassurances from Ruth Kelly, the Education Secretary, and Sir David Normington, the department’s former permanent secretary.

The report said: “Given that the increase in expenditure on education is declining, we are concerned that too much reliance is being placed on future savings which may be difficult to achieve.

“The extent to which these savings are transparent will be crucial.

“Unless the savings that the Department is saying it will be able to make are real savings which will fund activity, it may find itself struggling to maintain its funding across the sector.”

Despite recent increases in education spending, the gap between health and education as a proportion of the economy has risen steadily over the past 13 years, said the report.

In 1992-93 education spending represented 5.4 per cent of gross domestic product and health 5.6 per cent.

By 2004-05 education was at 5.6 per cent but health had climbed to 7 per cent At 2003-04 prices, education spending has risen by a third from pound;43.6bn in 1992-93 to pound;64.5bn in 200405. But health nearly doubled over the same period from pound;45.3bn in 1992-93 to pound;81bn in 2004-05, and is still in serious deficit. Sir Nigel Crisp, head of the NHS, quit this week because of rising deficits.

The report said: “While accepting there have been real increases in education expenditure as a proportion of GDP, we remain uncertain as to why education and health have been relatively differently treated by recent public expenditure settlements.”

The committee said spending on schools had increased in real terms by 50 per cent since 1998-99, compared with 56 per cent on further education and only 18 per cent on higher education.

* william.stewart@tes.co.uk