Under a new agreement, local authorities will have more freedom but more accountability.Schools will have to make radical adjustments in the way they report their performance following a "concordat" between the Government and the local authorities on how councils are funded and monitored.
This was a key part of Wednesday's statement to parliament by John Swinney, the Cabinet Secretary for Finance, on how the Government plans to spend the pound;30 billion it will have at its disposal by 2011.
At the heart of the new agenda are "outcome agreements" with local authorities. In return for agreeing to freeze council tax at its current level, ministers will give the authorities much greater scope over how they spend and perform - although Mr Swinney acknowledges that the money which will be available for education and other services will be much less than he anticipated because of the recent Treasury settlement on UK spending.
The concordat, signed by the Convention of Scottish Local Authorities and the Government, will require every local authority to set out in a single report each year what it has achieved and the progress it intends to make in the ensuing year towards delivering key government policies, including class size reductions and increases in pre-school hours.
Mr Swinney said the Government would reduce the amount that goes on "ring-fenced" funding, which restricts councils to spending on specific national initiatives. This will decrease from pound;2.7 billion to pound;300 million by 2011, giving the authorities considerably more spending freedom.
The sting in the tail is Mr Swinney's intention to increase the financial restrictions on the whole of the public sector, which will have to make efficiency savings of 2 per cent a year instead of 1.5 per cent - "a significant challenge", as he described it. But the minister said this would release pound;1.6 billion to be spent on frontline services by 2011.
Although it is not spelt out in the concordat, it is expected that the new longer-term "outcomes" of achievement, overtaking narrower measures such as exam results, will take the form in education of between four and six high-level targets.
These will set yardsticks for the kind of young people schools are trying to develop, as embodied in the four capacities of A Curriculum for Excellence; how schools are meeting the needs of all pupils; the quality of pupils' teaching and learning; and schools' leadership and capacity for improvement.
Targets for improvement would be established by each authority and ways of measuring them agreed. As part of a "national performance framework", education authorities would be required to increase the proportion of their schools and pre-school centres receiving "positive inspection reports", although that is not defined and no deadline has been set.
John Stodter, general secretary of ADES, told The TESS: "These changes put local government into a much more responsible position. Ministers are telling us we have to deliver on big outcomes and that we have the freedom and responsibility to make it happen. We should not start with saying 'we can measure something so let's make that the target' but asking 'what are we trying to achieve and what are the sensible ways of measuring it?' It's a long-term agenda and, politically, quite a risky thing to do."
The Government has had to trim two of its most cherished pledges because of the political and financial arithmetic - class sizes and student debt. Under pressure from local authorities, its promise is now to move "as quickly as is possible" to reduce class sizes to a limit of 18 in P1-3. But the authorities will be expected to show "year-on-year progress" towards reaching that target.
And Mr Swinney said in his statement he recognised there was insufficient parliamentary support for tackling student debt and there would be no funds for it over the next three years. But there would be a "phased transition" from student loans to grants, beginning with part-time students.
The Government has also had to stop short of its manifesto commitment to increase the provision of free nursery education for three and four year olds by 50 per cent, from 400 to 600 hours a year. Mr Swinney will fund a rise to 475 hours, rising only to 570 hours in 2010; this would be an increase in councils' 38 weeks of pre-school provision from 12.5 hours to 15 hours a week.
The budget settlement will also not fully satisfy colleges and universities whose allocations from the Scottish Funding Council will go up from pound;1.63 billion this year to a planned pound;1.81 billion by 2011, an increase of pound;178 million over three years - around what the universities alone were demanding immediately.