Schools will be doing well if their budgets increase by 5 per cent per year, two-thirds of the current rate of increase, a leading expert on public finances told the Liberal Democrats.
Tony Travers of the London School of Economics said the days of record funding increases for schools were over. He predicted that the next spending review will be "very, very, tight" with little scope for the Government to continue to increase education spending at the rate schools have enjoyed since 2000.
His warning will alarm schools who are relying on future funding increases to balance their budgets as many heads went into debt to avoid making redundancies as a result of this year's funding crisis.
It comes with ministers locked in negotiations over the next three-year spending plan which will cover the years up to 2007-8. Unlike previous spending reviews, Gordon Brown, the Chancellor, sees little scope for overall increases in public spending, leaving each department fighting to get a slice of a smaller pie.
Mr Travers said the Department for Education and Skills is competing in a bidding war and other departments - such as transport - feel that it is their turn for extra cash.
He predicted that ministers will try to dampen down the expectations of schools and other services which have been raised by the sustained increase in public spending during the past few years.
Mr Travers, an acknowledged authority on local government finance, said schools will be doing well if their budgets increase by 5 per cent per year.
"If you look at the situation this year when the increase was 7 or 8 per cent, for many schools that will feel like cuts," he told a fringe meeting organised by the National Union of Teachers.
A TES survey carried out last month suggested that more than 3,000 teachers' jobs have been lost as a result of this year's crisis.
Mr Travers said those attempting to prevent a repeat of this year's problems and hoping to ensure fair funding have two choices.
Either they can opt for increased central control through a national funding formula, or devolve power to a local level, giving councils a greater role in raising and distributing funds.
Peter Downes, a Lib Dem councillor and former Secondary Heads Association president, said he wanted a national entitlement for every school topped up by funds raised by councils through a local income tax.