Major defies school governors' threats

Treasury resists compromise that would delay teachers' pay rise

The Government was last night digging in for a confrontation with teachers and school governors over the Treasury's refusal to find more money to fund a 2.9 per cent pay increase for 500,000 teachers. Some school governors threatened to set illegal budgets rather than sack teachers to pay for the pay rises out of school budgets.

The Cabinet is considering delaying the full implementation of the pay increases to spread the cost, estimated at £290m, over two stages. But the Treasury is resisting phasing in the increases. Gillian Shephard, the Education Secretary, will take the battle to the full Cabinet on Thursday to resolve the crisis caused by the Treasury's refusal to increase her budget by more than 1.1 per cent to meet the teachers' pay review body recommendations.

After Mrs Shephard failed to win more money at a meeting with Jonathan Aitken, the Chief Secretary to the Treasury, last week, there was speculation at Westminster that she will appeal to John Major before Thursday's Cabinet meeting. Downing Street said no meeting with the Prime Minister had been fixed, but could not rule out his intervention.

The latest moves came amid mounting concern over the impact on schools of a pay rise widely expected to be around the rate of inflation - 2.5 to 2.9 per cent - but not fully funded by the Government. Some secondary schools face cuts of £100,000 in their budgets, and governing bodies in Shropshire, Warwickshire. and Merton, south London, are threatening to resign. Other schools' governors have warned they will refuse to implement cuts, in the form of teaching redundancies or larger classes. In some cases they have threatened to set illegal budgets.

There were signs from the Prime Minister's office and the Treasury that the Cabinet will resist demands for more money for the teachers, but will consider phasing in the rises from April. "Ministers will have to take a view in the Cabinet," said the source.

The Cabinet could reject the pay recommendations, but that would lead to a clash with the teachers at a time when Mrs Shephard has been rebuilding the Government's relations with teachers, parents and governors. A spokesman for the National Union of Teachers said: "Phasing the pay award would only make the cut in teachers' pay more painful."

The teachers' pay rises are part of the Cabinet's annual approval of pay review body reports covering hundreds of thousands of public sector employees. The Chancellor, Kenneth Clarke, has insisted on zero public sector pay rises, unless they can be funded from productivity. But there will be an outcry if public sector pay is held down after big increases for executives of the privatised utilities.

Mrs Shephard won an increase in the education budget of 1.1 per cent last year after telling colleagues the Treasury's spending restrictions and a cost-of-living pay rise could lead to 10,000 teacher redundancies. A pay rise of 2.9 per cent could cost £290m.

Simon Goodenough, chairman of the National Governors' Council, called on the Prime Minister to intervene. "The decision last week to endorse the inadequate funding proposals for local authorities has been greeted with dismay by our members. We are not surprised that governors are refusing to allow the hard work of their schools to be undermined," he said.

Labour will reinforce the demands for the teachers' pay review body recommendations to be fully funded by the Treasury today in a full-scale debate in the Commons.