Treasury to block schools rescue package

The Chancellor, Gordon Brown, will refuse to bail out Britain's struggling schools, thwarting Charles Clarke's plans to provide them with a cash lifeline next year.

Mr Clarke, the Secretary of State for Education, is understood to be devising a funding package that will guarantee more money for schools in an attempt to prevent a repeat of this year's budget crisis.

But the Treasury is adamant it will stick to its three-year funding formula. No new money will be made available from outside the already allocated education budget.

That would mean that either the schools - some of which are being forced to make staff redundant this year - will have to cope with carried-over budgetary problems or other areas of education funding will suffer.

Asked if there were plans to find additional cash for schools next year, a Treasury source said: "The settlement for the Department for Education and Skills was announced at the spending review last year. It was a record increase. I am not aware that there has been any request for additional funds."

The Government has made clear that it expected this year's settlement for schools to be the toughest in the three-year funding cycle, thanks to changes to pensions, an increase in teachers' pay and the hike in national insurance contributions levied to pay for improvements in the health service. But ministers insist that the 11.6 per cent increase in funding this year, which amounts to £2.6bn, has left room for schools to cope.

Steps have also been taken to bring in a new system for schools funding including three-year budgets for schools and direct funding from government, by-passing the traditional rights of councils to decide local priorities.

David Miliband, the school standards minister, is sitting on a committee with the local government minister, Nick Raynsford, and council leaders to thrash out a workable system for next year.

It is clear, however, that any attempt by Mr Clarke to deliver a minimum funding guarantee to every school in England would result in another part of the public services having to take a cut.

Teaching unions argue that more must be done now to avoid further redundancies. They say the cuts being made by schools masks a much larger decline in teacher numbers. It has been claimed that up to 1,500 teachers face redundancy, but the DfES insists that a lot of those teachers will be redeployed. Mr Clarke has said the level of redundancies caused by budget cuts will be well below 500. It is unclear, however, whether the 30,000 teachers retiring this summer will all be replaced.