Education is set to reap the financial rewards of Labour's promise to make it + the top priority. The Government is preparing to give local authorities a rise + almost double inflation for nursery schools and to lift the cap on council + spending.Ministers will next week unveil rewards for local authorities with + good under-fives services as part of their manifesto commitment to give every + four-year-old a nursery place.They will also announce that they are to relax + the limit on council spending. This should help make sure that councils spend + the #163;835 million extra for education announced in the July Budget on their+ schools.The cash boosts come as Chancellor Gordon Brown this week unveiled a + huge expansion of childcare services. A total of #163;300 million is to pay + for 30,000 out-of-school clubs over the next five years, providing places for + nearly one million children. Details of the extra money for education have been+ revealed to The TES and chief education officers by Stephen Byers, the school + standards minister, ahead of official announcements on Tuesday.He said Labour+ wanted to be able to fund schools according to their needs rather than pupil + numbers. From April ministers will also change the way under-fives services are+ funded. Currently money is allocated per head of population and this would + alter to mirror what is actually available in a borough.This would mean rewards+ for councils with good nursery services such as North Tyneside - which + includes Mr Byers' Wallsend constituency - Leeds, Liverpool and the London + borough of Ealing.Authorities with a minimal service, such as Gloucestershire, + Essex and Oxfordshire, will be eligible for a grant to support early-years + development plans. The money for the grants was set aside by the + Conservatives for the nursery voucher scheme.Previously, cash allocated by + Government for under-fives did not have to be spent on them and many + authorities used it to either keep the council tax down or to prop up other + services.Mr Byers said: "We want to move to a system where local authorities + are rewarded if they provide a good service."We are placing great reliance on + local authorities. They are going to have a key part to play in raising + standards."When the Government lifts the cap on council spending, each local + authority will be told how much extra money should be available for education. + Ministers hope that the #163;835m - taken from Government reserves - will be + spent on the day-to-day running of schools. However, it is not ring-fencing the+ money which will go into the general council kitty and education will have to + fight for it.Some of the hardest battles are likely to be with social services + departments which feel that they have been squeezed while education has been + protected from the worst effects of cuts.The relaxation of Government rules on + council spending is a crucial test for local authorities. It is an open secret + in Whitehall that many senior civil servants are anti-local government and want+ it abolished.If councils handle their new financial freedom well, though, + their future will almost certainly be assured.Graham Lane, education chair of + the Local Government Association, welcomed the moves and said: "The cash for + under-fives means that the promise of giving every four-year-old a nursery + place is going to be a reality."He cautioned, however, that a pay rise for + teachers above 2.5 per cent not funded by Government would spell serious + financial trouble for councils. Inflation is currently running at 3.7 per + cent.