MINISTERS this week poured billions of pounds into British schools but struggled to keep their flagship performance-related pay policy afloat after a court ruled that it was illegal.

Education across the UK is set to receive an extra pound;12 billion over the next three years, Chancellor Gordon Brown announced - an average annual increase of 5.4 per cent above inflation. Much of the new money for schools will come direct from central government.

But it comes with strings attached. Schools will be set new targets for 14-year-olds, further education colleges and universities will be expected to take more students and every local education authority will be expected to ensure that at least 38 per cent of pupils gain five GCSEs at grade C or better.

Education Secretary David Blunkett said that the increase in education spending between 1998-99 and 2003-04 was 33 per cent above inflation, “More than the entire increase between 1978-79 and 1996-97.”

The teaching unions welcomed the extra money but John Dunford, general secretary of the Secondary Heads Association, branded the targets “completely unnecessary”.

However, while school budgets are set to increase, pay rises for many teachers are delayed after the Government’s humiliating defeat at the hands of the National Union of Teachers. Mr Justice Jackson ruled that Mr Blunkett had acted illegally in introducing standards for performance-related pay without proper consultation and said he would not allow him to “foist” the reforms on the profession.

It proved a double-edged victory for the NUT. While the ruling means the Government will have to goback to the drawing board, it also means that almost 200,000 teachers who applied for the pound;2,000 pay rise - many of them NUT members - are unlikely to see any pay rise in the autumn. Steve Sinnott, deputy general secretary of the NUT, said ministers should “devise a new system with teachers who have had enough of the Government behaving as if it could impose any law on them”.

Ministers are considering an appeal against the decision, but schools minister Estelle Morris insisted in Parliament that Labour would still introduce the pay scheme and successful applicants would have pay rises backdated.

Unless a successful appeal is made, Mr Blunkett will have to consult the School Teachers’ Review Body or even Parliament and the Welsh Assembly before new criteria are introduced.

Also in court was headteacher Marjorie Evans who was warned she could face prison after being found guilty of hitting a 10-year-old pupil. Magistrate, Mr Manning-Davies, said: “It is a serious case and I have to consider custody.”

Meanwhile, the House of Lords reached a compromise over the Government’s new sex education guidance. It increases the chances of Section 28, banning promotion of homosexuality in schools, being repealed later this month.

The Government defeated an amendment from “family values” campaigners by 234 votes to 220.

OFSTED, the schools inspectorate, saw its record on equal opportunities come under scrutiny this week. The Equal Opportunities Commission

criticised inspectors for failing to tackle racism in schools. Its report said that inspectors had been hindered by lack of expertise and understanding about how to tackle race issues and that only one in 400 OFSTED reports even mentions “racial equality”.