Most of the capital's authorities will honour the teachers' pay award as part of an explicit policy to prioritise education, it emerged this week.
The dramatic exception is Lambeth, which has decided that putting its notoriously troubled finances in order must be the priority. It is not providing any money for the award and up to 175 teachers could face the sack.
The authority said schools must find the money from their reserves, but heads and union officials say less than half have any reserves left. National Union of Teachers members in the borough are considering strike action to fight the cuts.
Elsewhere it was clear that special protective treatment for education would be at the expense of other services and steep rises - as much as 30 per cent - in council tax.
London authorities were the losers in last November's public spending round compared to the counties - education grant was cut across the capital and the education SSA (the amount the Government thinks an authority should spend) was reduced in inner London.
Recruitment may become a problem, however, especially in the wake of the recent criticisms of low standards in inner-London. The School Teachers' Review Body has rejected a suggestion made last year by Gillian Shephard that it should create a special incentive payment of Pounds 1,500 to attract teachers to difficult areas. It suggests that there is already enough scope for schools to reward these teachers using recruitment and retention points.
But Will Tuckley, head of policy at the Association of London Government, pointed out that teacher turnover in London had increased to 10.9 per cent compared with 9.5 per cent last year. "While there may be nothing to panic about at the moment, we could be seeing the beginning of a return to the appalling situation we had a few years ago when councils were desperately recruiting people from abroad." In 1989, the figure for teacher turnover was 23 per cent.
The London allowance will increase by the same percentage as pay generally, but the Pounds 822 inner London supplement - considered an anachronism by the review body but still paid by some LEAs - is excluded from this in the review body's report.
Hammersmith and Fulham said it would be able to fund the award despite a 3.8 per cent cut in its education grant, but other services face cuts of Pounds 7 million. Controversially, there will also be a Pounds 100 rise in council tax - bringing band D up to Pounds 720.
Southwark, which suffered the biggest cut in education grant, is facing an overall cut of Pounds 10m. It is funding the pay award but council taxes will rise by 30 per cent, taking band D up to Pounds 766.
Hackney, Islington, Kensington and Chelsea, Tower Hamlets were still setting their budgets, but were confident they could fund teachers' pay. Greenwich is setting aside 3 per cent for pay and "looking at ways of providing the rest without cutting services".