Ministers are digging into the contingency reserves for an extra pounds 1bn for local authority spending on schools in 1998/9 to fulfil their promise that education will be a priority.
A further pounds 1.3bn will be spent over the next five years on building repairs, reckoned by local authorities to amount to pounds 3bn. The money will come from the windfall tax on private utilities.
The Government expects new public/private partnerships to repair and maintain some school buildings.
All schools will be able to apply for New Deal for Schools capital. Local authorities will assess the merits of each case and submit applications to the Secretary of State for Education. Those which include public/ private partnerships will be favoured.
Money will also be available to improve security and technology. Schools will have to show not only how they intend to repair buildings but also how they intend to improve standards and invest in technology.
David Blunkett, the Secretary of State for Education, made it clear he expected the money for local authorities to be spent on books, computers and teacher training rather than on big pay rises for teachers. Authorities should also develop plans to improve discipline and tackle truancy.
Mr Blunkett said: "The Chancellor has made it clear that he will continue to look for restraint in pay settlements in the public sector. I shall be expecting the School Teachers' Pay Review Body to take that fully into account."
Government sources said that school and local authority spending would be carefully monitored to ensure that the money was used as the Government intended.
David Hart, general secretary of the National Association of Head Teachers, said: "I am absolutely delighted. This means that schools are no longer being expected to deliver better and better results without the necessary tools to do the job."
In line with its aim of encouraging learning for adults beyond school and university, the government is allocating pounds 5m from Welfare to Work funding to start up the University for Industry - a hi-tech means of helping people in work boost their skills.
Like the Open University, which has offered thousands of people second chances in higher education using television, the University for Industry will use satellite, cable and interactive technologies to bring lifelong learning directly into homes and workplaces.
The university, which will also be used to help jobless people learn basic skills, will have no campus, but will approve and commission high- quality materials for study.
Cash from Department for Education and Employment reserves is being used to set up individual learning accounts, another means of encouraging adults to get the learning habit. The Government will contribute a sum - expected to be around pounds 150 - to would-be learners, who will then top up the account with their own cash and spend the money on education or training. Employers would also be able to add contributions.
Amid concern that money for education and training for 16-18-year-olds is not shared out fairly at present between colleges, school sixth-forms and training providers, the Government pledged to complete its review of funding for the age group. It aims to target resources to improve staying-on rates.