Education cash clash threatens Tory unity

COLIN BROWN

Chief Political Correspondent

A row over education spending between Gillian Shephard and William Waldegrave, the Chief Secretary to the Treasury, is threatening to undermine John Major's attempts to revive party morale.

The Secretary of State for Education emerged from her first bilateral meeting with Mr Waldegrave with the threat of a tight squeeze on education spending. "It was very, very difficult," one official said.

Tory MPs are so alarmed they are calling for the Prime Minister to intervene to stop the Treasury raising a new threat of teacher redundancies.

The row over the annual review of spending by the Treasury will cast a shadow over the announcement by Mr Major on Tuesday of more money for grant-maintained schools.

The provision of more money to get all schools to opt out of local authority control with more powers to select pupils is intended to launch Mr Major's new agenda for the Tories.

But Tory MPs yesterday warned it would fall flat, unless the Treasury ensured schools had enough money to pay for teachers. "What about the other schools? We can't afford another year in education like the last one," one Tory MP said.

He added that a group of backbench Tory MPs were planning to campaign for the education budget to be protected against the Treasury by appealing to Downing Street.

Mrs Shephard has annoyed Kenneth Clarke, the Chancellor, by her high- profile campaign to protect her budget, but the Tory grass roots are also warning the Tory party leadership that higher priority has to be given to education in the run-up to the general election.

Some party activists told Mr Major in Bedfordshire on Thursday that tax cuts should not be handed out at the expense of key services, such as education, health and law and order. The Chancellor was equally blunt in telling the party that tax cuts cannot be funded without cuts in public expenditure.

It will leave Mr Waldegrave with a difficult task in finding the room to deliver tax cuts in the November Budget. Mrs Shephard is fighting her corner, and the Tory source said: "It's 15-love to the Treasury. But it's not the end of the set."

The education budget also depends on the settlement reached on the rate support grant for local authorities by John Gummer, Secretary of State for the Environment. If his budget suffers cuts by the Treasury, it will leave local authorities with insufficient to meet any pay increases for teachers.

The Audit Commission reported this year that a Treasury freeze on running costs by councils will force local authorities to cut their pay bills by pounds 1bn or 10 per cent. Many councils fear they can only achieve the Treasury's targets by reducing the numbers of white-collar staff, such as teachers.

Mrs Shephard was optimistic earlier this year that her budget would be protected. She said: "During the consultations on teachers' pay this year a lot of people expressed anxiety about the level of funding of schools in 1996-97. That is an issue which my ministerial colleagues and I will be considering in the next public expenditure round, leading up to decisions which will be announced in November."

She warned Cabinet colleagues last year of the consequences of not fully funding the teachers' pay award. Figures compiled by researchers at Manchester University suggested that up 14,000 teachers could lose their jobs.

Schools were expecting to cut their budgets by 1.2 per cent this year and 2.2 per cent next year, while class sizes would rise.