The deal will mean that, from September, teachers who succeed in crossing the new performance threshold will receive rises of up to 11.9 per cent. They will also have the chance to earn up to pound;30,000 on a new higher pay scale.
Staff with extra management responsibilities will be able to earn up to pound;37,000 (with maximum merit payments), while fast-track teachers could eventually earn up to pound;43,000. Deputies and senior teachers will join heads on the new "leadership" salary spine created last year.
Mr Blunkett insisted the package represented "a good settlement for teachers - well above inflation and not staged". But union leaders were divided. Doug McAvoy, general secretary of the National Union of Teachers, said the award would leave the profession "underpaid, under-valued and underwhelmed", while Peter Smith at the Association of Teachers and Lecturers, described it as "sensible and realistic".
The 3.3 per cent across-the-board rise compares with a "headline" inflation rate of 1.8 per cent or an underlying rate (including mortgages) of 2.2 per cent. Average earnings are rising by an annual rate of 4.9 per cent, according to evidence taken into account by the School Teachers' Review Board in reaching its pay recommendations.
The most controversial element of the package is the criteria the Government plans to adopt for assessing teachers applying for promotion. The latest propsals retain pupil progress as a key measure of teacher effectiveness.
Nigel de Gruchy, general secretary of the other main classroom union, the NASUWT, said retaining the measure would prove deeply unpopular and warned the criteria would become a "bull-shitters' charter".
In a busy week, to be concluded tonight with an appearance on BBC1's Parkinson show, Blunkett was forced last weekend to brush aside comments by chief inspector of schools Chris Woodhead, on the subject of the promotion of homosexuality in schools.
Mr Woodhead told the Sunday Telegraph he could find no evidence to suggest that the controversial section 28 legislation - which bans the promotion of homosexuality - deterred teachers from taking action against homophobic bullying.
Mr Blunkett insisted the clause must be scrapped because it was wrong to presume teachers would "promote a particular sexuality or orientation".
Mr Woodhead also had a busy week, with new inspection reports on four more local education authorities, including Mr Blunkett's stamping-ground, Sheffield, criticised for "serious weaknesses" by inspectors. But it escaped being named as a failing LEA, unlike its neighbour, Leeds, which now faces privatisation of key services.
Elsewhere there was relief over the future of A-level photography.
The Government decided against a plan to water down the syllabus this year, after a campaign by teachers and practitioners.
Campaigners, who included photographers Don McCullin and Eve Arnold, welcomed the decision to retain a written paper. There were fears that the paper would be dropped, undermining the exam's credibility.