Schools are facing a near half a billion pound "stealth cut" following a "totally unexpected" reduction in capital funding by the Government, The TES has learnt.
In a letter to schools, education secretary Michael Gove said there would be an 80 per cent cut in devolved capital funding, used for maintenance and to buy ICT equipment.
Both primaries and secondaries were braced for heavy capital spending cuts following October's spending review, but the decision to cut the Devolved Formula Capital (DFC) grant will see the average 1,000-pupil school have its pound;130,000 annual payment slashed to just pound;26,000.
Estimates from heads' union the Association of School and College Leaders (ASCL), suggest that the new settlement will equate to around a 2 per cent of schools' overall budgets.
ASCL policy director Malcolm Trobe said the size of the cut was "totally unexpected", adding that many heads had borrowed against future grants to fund larger building projects. They will now be forced to raid other areas of their school's budget.
"It is a hefty chunk of money to lose, particularly if you think that a school will be facing reductions elsewhere in its budget. It would not be unreasonable to assume that schools will now be looking at reductions of around 4 to 5 per cent," Mr Trobe said.
"Schools are facing a big, big problem," he added. "The Government will say that it is capital funding and not taking it away from staffing, but the money was being used - whether it was on ICT development or new building work - and having it cut means schools will have to find the money from elsewhere in the schools budget. That is why it's a stealth cut."
David Fitzsimmons, headteacher at Holsworthy Community College in Devon, will see his school's grant drop from pound;80,000 a year to just pound;16,000, leaving him with serious financial difficulties.
"We carried out pound;90,000 worth of building work and I borrowed against our future grant," Mr Fitzsimmons said. "But we have just been asked to carry out pound;17,000 worth of work to do with our gas supply in order to comply with health and safety regulations.
"We still owe the local authority pound;30,000 from our grant. That means we have pound;47,000 worth of debt with only pound;16,000 to pay for it. It will mean we'll have to take that money from elsewhere, possibly our staffing."
Conyers School in Stockton-on-Tees received pound;150,000 a year through the grant, which will now be slashed to just pound;22,000.
Head John Morgan said: "Every school will feel the effect of this, particularly as schools have been able to use the grant to buy IT hardware, and people will have to dip into their (other) budgets to continue to pay for it."
According to Russell Hobby, general secretary of heads' union the NAHT, the cut will hit the smallest schools hardest.
"This is the most painful part of the cuts overall," Mr Hobby said. "It will have a particular impact on smaller schools, because you get to the point where the sum of money goes beyond the critical mass, so the less you can do with it."
A Department for Education spokesperson said: "The Government has decided the bulk of the funding available should be allocated to local authorities rather than directly to schools, so that it can be targeted at needs and prioritised locally.
"This means that maintenance capital funding will be available for unexpected urgent needs, and that proactive programmes of investment can be planned and efficiently procured."
Meanwhile the f40 group, comprised of councils with the lowest education budgets, say cuts to grants, school building projects, an increase in teachers' pay and the cuts to sixth-form funding will mean their schools are facing budget drops of 5 per cent.
Gillian Hayward, f40 vice-chair and chair of the Gloucestershire Schools Forum, said: "Despite statements to the contrary from Westminster, f40 believes that at school level there will be a real-terms funding reduction equivalent to around 5 per cent in the next financial year starting in April once all the relevant factors are taken into account."