Local authorities will be able to claw back more money from schools with big bank balances, the Government has warned.
Headteachers and councils should lead a clampdown on their primary and secondaries considered to be hoarding too much money, new guidance issued this week says.
And ministers will step in if the current total - almost pound;2 billion - doesn't fall, they have warned.
The Department for Children, Schools and Families allows primary heads to keep back no more than 5 per cent of their total budgets and secondary heads 8 per cent, but local authorities (LAs) have been told to set lower thresholds.
Additionally, school leaders will have to show in detail why they have saved large sums of cash.
Councils and school forums - committees made up of heads and governors who help decide council education spending - should be the first to take "strong action" over excess balances, the guidance adds.
The cash being kept in the bank by headteachers is almost double the figure of 10 years ago. DCSF funding experts have said the amount heads are allowed to keep will be "kept under review".
"It is part of sensible financial planning to hold a small surplus, but schools should be spending their money on children, and local authorities should take strong action against those which have excessive surpluses.
"Local authorities should continue to monitor balances and use their powers to claw back excessive uncommitted surplus balances. If we do not see a substantial reduction in excessive surplus revenue balances, the Government will consider further action from 201112 to bring the total down."
The Association of School and College Leaders is campaigning against arbitrary claw backs. Members say the only way they can manage costs is by using savings. "I have one headteacher who has to pay out almost pound;100,000 every three to four years for Astroturf maintenance, so he sensibly puts aside pound;20,000 a year," said policy director Malcolm Trobe.
"If the money is committed, local authorities should allow it to be saved."
Teaching union NASUWT has welcomed the new rules. "Local authorities should use the powers they have more in order to tackle the problem of excessive balances," said general secretary Chris Keates.
"Where balances are clearly high this should be investigated thoroughly and local authorities should audit the claims and be sure that schools are being fully open about their plans. Local authorities should question more whether the reasons for the balances are legitimate."
A third of councils have said that they challenge schools with big bank balances and force them to provide evidence of spending plans. The DCSF wants more to act in this way.
Cash around the country
- London schools have the biggest bank balances (average surplus of pound;134,000, total pound;109m). South West schools have the smallest (average pound;43,000, total pound;30m).
- West Midlands has the highest proportion of schools with surplus balances (1,004 or 40 per cent). Yorkshire and the Humber has the lowest (23 per cent or 543).
- In 1999, 23,064 school balances totalled pound;740m. In 200809, there were 22,025 schools but the total had grown to pound;1.78bn.
- Some 1,848, or 8.4 per cent of schools, are in the red by pound;139m. Average debt per school is pound;75,000.