Councils demand inquiry into school funding shortfall

Local councils are demanding an investigation into claims by the Government that they have withheld £500m from school budgets.

Leaders of the Local Government Association (LGA), which represents the 150 local education authorities in England, will write to the Audit Commission this week asking the public finance watchdog to conduct an inquiry into the "missing £500m".

Graham Lane, chairman of the LGA's education committee, said the Department for Education and Skills had been guilty of blunders and incompetence over the handling of this year's education budget.

Last week, David Miliband, the School Standards minister, told a teachers' union conference – in response to rising concern over redundancies among teachers – that up to £500m in government money that should have been passed on to schools was still being held by local education authorities.

Mr Miliband said he based that figure on returns from 78 local education authorities indicating how they were distributing this year's budget. They showed that £250m had yet to be passed on to schools, he said, arguing that, if a similar picture emerged elsewhere, the total amount withheld would be about £500m.

But Mr Lane said that the only returns town halls had been asked for by the Department for Education and Skills related to last year's budget and that he would be surprised if they showed the figures quoted by the Schools Standards minister. "We need an independent investigation to find out what has happened," Mr Lane said. "I think there have been blunders at the department.''

Doug McAvoy, general secretary of the National Union of Teachers, said: "I don't care who is right. The money has to get into schools. If they find the £500m, though, I don't think that's enough."

Evidence grew yesterday of the high number of education authorities threatening teachers with redundancy as a result of shortfalls in school budgets this year. Peter Bishop, head of a primary school in the Wirral and an executive member of the National Union of Teachers, said 45 of the 101 primary schools in his authority had already declared redundancies. "That kind of impact is phenomenal," he added.

Baljeet Ghale, a teacher from Tower Hamlets, east London, said some teachers had been told their short-term contracts would not be renewed this summer. "Over £3bn has been spent by the Government in engaging in a war not wanted by the majority of people in the country when we're having to make cuts in our schools," she said. "In Tower Hamlets, the situation is dire."

Ministers originally announced that there would be a £2.6bn increase in education funding this year as a result of the Chancellor's comprehensive spending review. However, they conceded at the weekend that the true increase in money going to pupils, once costs had been met, was £250m, because of rises in teachers' pensions and national insurance contributions as well as the cost of meeting performance-related pay rises for some teachers.

Charles Clarke, the Education Secretary, has conceded that some schools will run into financial difficulties this summer. But he is adamant that the Government has increased investment in schools. Last night, a spokesman for the Department for Education and Skills said that the "missing money" identified by Mr Miliband had come from this year's local government settlement.