Clarke makes £800m U-turn to bail out schools

The Government announced a U-turn over the schools funding crisis yesterday and came up with a £800m lifeline to avoid a repeat of this summer's teacher redundancy fiasco.

Charles Clarke, the Secretary of State for Education, also made it plain there would be extra funding to bail out schools facing severe financial difficulties.

Mr Clarke said the £800m would be taken from unspent reserves within the Department for Education and Skills and paid directly to schools over the next two years from a central government fund aimed at improving standards.

His announcement is the first admission that there are large reserves within the department that can be allocated to schools. Official Treasury estimates put the figure at £846m.

As revealed in The Independent yesterday, the decision is also a reversal of the policy of cutting centrally controlled grants to individual schools. Ministers believe this decision played a large part in creating redundancies as councils spread the money more thinly among all their schools.

It was part of a series of moves outlined yesterday to ease the pressure on school budgets next year.

They were given a cautious welcome from headteachers' leaders, who said "the jury was still out" on whether the moves would be enough to avoid further redundancies, but that it meant ministers had recognised the seriousness of the funding crisis.

Outlining the package to MPs, Mr Clarke said: "This is the first step on the road to a more secure funding system for the next two years."

He added:"Some schools have found it necessary this year to spend from their reserves or from money for school buildings. Others have set deficit budgets." If they were unable to get back into the black next year, he said, there would be "limited transitional support to avoid damage to children's education".

Other measures included:

* promising every school a funding increase per pupil next year.

* announcing two-year budgets for schools and Local Education Authorities (LEAs) in autumn, to help them plan their budgets more easily.

* pressing for a two-year pay deal for teachers to be announced in November, instead of an annual rise in January.

David Hart, general secretary of the National Association of Head Teachers, said: "If LEAs do not play ball and do not ensure that individual school budgets received the required money, they deserve to be written out of the script. A national funding formula remains very much on the agenda for the long term."

John Dunford, general secretary of the Secondary Heads Association, added: "Today's announcement is a good first step, but there has been a loss of trust among headteachers who will want to see the size of additional funding for next year before passing final judgement."

Doug McAvoy, general secretary of the National Union of Teachers, accused Mr Clarke of a "political fudge". He said: "Because the Education Secretary refuses to remedy his funding mistakes, he continues to seek scapegoats, whether headteachers or local education authorities."