Whitehall plans to miss out the town hall middle men

Sweeping changes to the system of public spending are being planned by Tony Blair to ensure that government money is used to improve front-line services. The Prime Minister is ready to risk a clash with local authorities and police chiefs by channelling millions of pounds directly into services instead of handing it to town halls and chief constables.

The new policy, dubbed "front-line first" by ministers, reflects Mr Blair's frustration that the public has been slow to see the benefit of the billions of pounds pumped into improving services since Labour came to power. Ministers complain that the present system takes too long to make a difference because money is channelled through "middle men" such as councils.

They are furious that some money earmarked for education has been switched to other areas by local authorities or wasted on bureaucracy.

Ministers complain that chief constables have been keener to spend money on high-technology equipment than putting more policemen on the streets. They also believe that transferring money directly to the sharp end will tackle widely varying performance by different councils, police forces and health authorities. "We need to bring the worst up to the standard of the best," said one minister.

The first sign of the new policy came yesterday when David Blunkett, the Education Secretary, announced that £300m of the extra £1bn for education included in this week's Budget would be handed to school heads and governors to ensure it was spent on staff, books and equipment.

Councils are furious at being bypassed and Sir Jeremy Beecham, chairman of the Local Government Association, warned Mr Blunkett of "stormy waters" ahead if ministers tried to exclude town halls from funding schools. "Forty thousand schools across the length and breadth of England and Wales cannot be run from Whitehall," he said.

Some Downing Street advisers see the funding shake-up as the first step towards the abolition of local education authorities. Although Mr Blair is unlikely to opt for their abolition, he will seek reform.

Mr Blunkett has told town hall leaders this week: "If we didn't have education authorities, we would have to invent something like them, but they would be invented for an entirely new era, and that's what we need to work out together."

It emerged yesterday that Mr Blair wants to apply the schools move to other areas. He has asked his officials for ideas which could be included in Labour's manifesto at the next general election. Council services, such as housing and social services, could be affected.

He also wants other ministers to follow the lead of Alistair Darling, the Social Security Secretary, who is to transfer 3,000 backroom Benefits Agency staff into front-line posts helping benefit claimants to find work. Mr Blair has complained the "scars on his back" over his attempts to reform public services, and ministers are frustrated at the time it takes for government money to reach the front line.