Grant-maintained schools have been told they will no longer be able to borrow money, since a new ruling means the debts will be counted as part of the Public Sector Borrowing Requirement.
Previously, GM schools had been classified as private sector and, unlike other schools, were able to borrow money with approval from the Funding Agency for Schools. Grant-maintained schools had hoped this facility would be extended when they became foundation schools.
City technology colleges will be affected by the same ruling.
Stephen Byers, the school standards minister, said that the Department for Education and Employment had challenged the ruling of the independent Office of National Statistics. He said that the amount currently borrowed was Pounds 11 million, and there was Treasury cover for that amount.
During the committee stage of the School Standards and Framework Bill, Nick St Aubyn, MP for Guildford, said schools would lose out by the change.
Mr Byers replied: "We tried very hard, many hours were spent trying to arrive at a definition of school capital that would fall outside the PSBR, but it proved impossible."
A letter from the FAS to GM schools said: "All borrowing by GM schools from now on will have to be scored as central government borrowing in the national accounts.
In practice this means that future borrowing by GM schools will have to be accommodated within the agency's capital budget."