Councils told: Don't steal cash for schools

Whitehall chiefs fear that some cash-squeezed councils will raid their education budgets to fund higher pay rises for teachers, or to fund urgent social services commitments, including care for the elderly, in spite of warnings by ministers.

David Blunkett, the Secretary of State for Education and Employment, yesterday warned local authorities that they would risk forfeiting their right to manage education funding if they spend their pounds 1bn Budget windfall on teachers' salaries instead of on schools.

If authorities did not toe the line, the Government would consider introducing a national funding formula which would mean it financed schools directly, bypassing councils altogether, Mr Blunkett said.

Speaking at the opening of the Council of Local Education Authorities conference in Bristol, he told LEAs to make raising school standards their top priority when distributing the extra cash.

None of the money should be used to award teachers above-inflation pay rises, he said. "We are asking you to join with us to ensure that money goes where it was intended."

Education was given an extra pounds 1bn revenue and pounds 1.3bn for capital spending to tackle the school buildings crisis in the Budget, partly funded by the windfall profits tax on the privatised utilities.

Mr Blunkett is confident that he can ring-fence the capital spending for repairing school buildings, by allocating it for specific projects, but ministers fear the additional revenue will be raided. Mr Blunkett was given the backing of the Local Government Association's (LGA) leaders who are writing a round robin letter to all LEAs to resist pay rises above the rate of inflation.

Graham Lane, chairman of the LGA's education committee, said he had urged Mr Blunkett to sack the independent teachers' pay review body if it proposed a pay award that was higher than inflation.

The LGA is seeking some flexibility in the spending caps on councils, to enable them to spend more and meet the higher cost by increases in the council tax next April.

The deep concern about council spending was underlined by John Prescott, the Deputy Prime Minister, yesterday at the first summit with council leaders.

Mr Prescott and the town hall chiefs pledged to find ways of averting cuts in vital local services through a "radical review" of funding after a breakfast "summit" in London.

Mr Prescott confirmed that the Government plans to meet its manifesto commitment to end capping, although it would remain next year.

But he said that ministers and councillors were looking at alternative ways of raising necessary cash.