Leading article: The crisis that never was

The investigation by the Audit Commission into last year's school funding row contains much food for thought for the Government. For a start, it casts doubt over whether the solution put forward by ministers - of guaranteeing a minimum funding increase for every school - is the best way of tackling the problem.

The investigation by the Audit Commission into last year's school funding row contains much food for thought for the Government. For a start, it casts doubt over whether the solution put forward by ministers - of guaranteeing a minimum funding increase for every school - is the best way of tackling the problem.

By guaranteeing real-term rises in budgets for all, says the Commission, ministers may have left themselves without enough cash to bail out those schools that really are in serious difficulties. Yesterday's report makes it clear there was no widespread funding crisis. Some schools were winners in last year's budget round. Others were losers. The question remains: do the schools that were winners deserve the same guaranteed real-terms minimum increase this year as others? The report also points out that uncertainty over future finance led schools to squirrel away more money in reserves than in previous years. So, it welcomes Gordon Brown's decision to move towards giving schools three-year rather than one-year budgets to enable them to plan better for the future.

However, it suggests that some of the squirreling away may have been a panic measure. Perhaps local education authorities should be more "robust" in using their powers to "confiscate" this money, in other words take it away and ensure it is used for front-line services in the year that is intended. Therein lies the rub. The thrust of the Government's five-year plan for education was to further restrict the powers of local education authorities over school spending. While the financial experts at the Audit Commission stop short of recommending that the LEAs be given extra powers, they do want to see them taking a more interventionist role - and that conflicts with what ministers appear to favour.

The report dismisses any attempt to control the finances of all state schools from the centre as unworkable. Happily, ministers also reject this route too. Ministers should, however, read and inwardly digest the Audit Commission report. Then maybe they would realise that the LEAs should not always be cast as the villains of the piece and that to engage in town hall bashing when things go wrong is not necessarily the right answer.

The report scotches one of the suggestions being put about by the Education Secretary Charles Clarke last year when the row erupted. It was not true, it says, that local education authorities failed to pass central government money on to schools as he suggested.