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When a funding increase stands still

The Government has learned an important lesson during the current financial year. Following the middle-class revolt against school budget cuts in the spring of 1995, the local government finance settlement for 1996-97 was just generous enough to avoid a second revolt during the early weeks of 1996.

Schools received just enough cash - in most cases - to pay the full teachers' pay award without cutting the numbers employed. The 1996-97 arrangements worked well from the Government's point of view - so well indeed, they are to be repeated for 1997-98.

Chancellor Kenneth Clarke, Education and Employment Secretary Gillian Shephard and Environment Secretary John Gummer have each made clear what will happen next year.

Local authority revenue spending is likely to rise by 2 to 2.5 per cent within expenditure caps set on Wednesday. Standard Spending Assessments (SSAs) for education will - for the third year running - be skewed towards education at the expense of other council services. Council taxes will have to rise at double the rate of inflation - an average of 6 to 7 per cent - because grant will increase by less than capped spending.

Changes in SSAs in 1997-98, though likely to be relatively modest, will still be sufficient to cause turbulence for some authorities. A number of councils and schools will have to raid their (often growing) reserves if individual areas and institutions are to avoid sudden changes in funding levels.

Listening to ministers at the time of the Budget, it was possible to discern a terrible confusion. On the one hand, the Chancellor was claiming he had made overall cuts in public spending. Yet at virtually the same time, he and Mrs Shephard were handing out what were presented as big "increases" in education resources. Much the same was going on in health, and law and order. Surely some mistake?

What happened, of course, is that while education was almost protected from spending cuts in real terms, other parts of the public sector, notably housing and transport, were shown the axe. Further and higher education have been less generously treated than schools. Even within schools funding, the "extra" Pounds 633 million will do no more than move the Government's projected spending figure for 1997-98 closer to (though still below) budgeted spending for 1996-97. That is, the new plans are lower than this year's budgets.

Whether or not local authorities slavishly follow the Government's injunctions to use any leeway given within council spending caps to give priority to schools will in part depend on how bad things have become in social services, the fire service and highways. This latter group of services has been sacrificed in recent years and cannot be cut back indefinitely.

Schools have been targeted by the Government for a marginal real-terms cut in their budgets in 1997-98. If they achieve even that, they will be doing well.

Tony Travers is a member of the Greater London Group at the London School of Economics

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