Local education authority budgets have been cut by an average 5 per cent per pupil this year - nearly 2 per cent more than governors predicted.
A report by the Chartered Institute of Public Finance and Accounting published this week shows local government spending is increasing by Pounds 1.3 billion (2.9 per cent) this financial year but the proportion spent on education is shrinking by more than 1 per cent, to 40 per cent.
Its finance and general statistics report for 1995-96 warns: "Constraints on local government expenditure are having a significant impact on schools. "
Ian Langtry, education officer for the Association of County Councils, said local authorities had about 5 per cent less in real terms to spend on each pupil this coming year because of inflation, the Pounds 270 million rise in teacher salaries and school rolls growth.
"It may be higher or lower than 5 per cent depending on whether councils can draw on their reserves. Derbyshire, for example, has nothing," he said. "We expect this will be a very bad year for schools."
The report follows a survey of more than 3,500 schools by the National Governors' Council and CIPFA published last month which showed local authorities were spending 2.2 per cent less on each pupil this financial year.
Jack Morrish, vice-chair of the council, said schools would face an average 5 per cent cut per pupil if LEAs spent the amount the Government allowed. He said councils and schools were trying to lessen the impact of the cuts by dipping into their reserves.
According to the new report, local authorities are cutting discretionary spending on education: catering is down from Pounds 396.7m in 199495 to Pounds 366.4m this year; administration costs from Pounds 153m to Pounds 151m; non-college-based adult education and youth community service from Pounds 804m to Pounds 762m: secondary school expenditure from Pounds 1.095bn to Pounds 1.078bn, and payments to the Higher Education and Further Education Funding Councils institutions from Pounds 21.5m to Pounds 18.9m.
Bob Jelley, secretary of FACE - Fight Against Cuts in Education - said: "If we don't get an adequate settlement next year, all hell will break loose."