Outcry as opt-out schools hold back £74m

Government officials faced angry questioning last night as it was revealed that opted-out schools were holding £74m in their bank accounts, enough to fund more than a quarter of the £290m needed to fully fund the teachers' 2.7 per cent pay rise.

One grant maintained school had £898,000 in the bank at the beginning of this financial year, the House of Commons Public Accounts Committee was told. On average, grant maintained schools had £80,000 in the bank while local authority schools had just £30,000.

The revelation has caused deepening anger among Labour MPs at a time when the Government is refusing to fund the teachers' pay settlement. Local authorities have been given a 1.1 per cent rise in spending for 1995-96 and thousands of teachers' jobs are threatened.

School governors have threatened to resign or to set deficit budgets rather than sack staff. Teachers have threatened to refuse to teach classes of over 30.

Alan Milburn, Labour MP for Darlington, said the money could have been used to make "substantial inroads" into the teachers' pay bill. So could the £45.5m spent in the past six years on grants transferring schools to GM status, he added.

He said Gillian Shephard, Secretary of State for Education, had castigated local authority schools for holding £700,000 - an average of £30,000 - while for GM schools to be holding much more was regarded as prudent. Later he said: "It's a case of double standards. The committee can't have it both ways and neither can ministers."

Sir Tim Lankester, permanent secretary at the Department for Education, said grant maintained schools had higher bank balances because more were secondary schools and so had bigger budgets. "As regards the GM sector as a whole there is probably a good reason why they have higher reserves, because they don't have recourse to the local education authority if they get into difficulties," he said.

Thirteen grant maintained schools have been given permission to hold more than 12.5 per cent of their annual budgets after the end of the financial year, the committee was told.

It was also revealed that the school with £898,000 in the bank, Dunraven School, in Lambeth, south London, will receive an extra £525,000 by 1999 under a system which the committee had said should have been phased out within two years. Another, the Raine's Foundation, in Tower Hamlets, east London, will receive £654,000 under "double funding" which gives GM schools extra money to cover expenses usually met by local authorities.

Michael Collier, chief executive of the Funding Authority for Schools, which funds GM schools, said Dunraven had been holding back funds for specific building projects.

- School governors in Warwickshire meet tomorrow to discuss a mass resignation in protest over education cuts. Will Clare, vice-chair of a county primary school and the person behind the proposal, said: "We cannot accept this year's cuts, because next year could be worse.''

A survey by the Independent found that six local authorities expect governors to resign.