Ministers retorted that this year's increase in the amount councils are allowed to spend - 5.7 per cent - would more than cover the bill.
Graham Lane, chairman of the Local Government Association's education committee, said it was demanding a meeting with ministers to ask for the extra money. "We will be meeting ministers soon and pressing them to use some of the pounds 1bn which has been put aside for restructuring the whole of teachers' pay to avert a cash crisis for education authorities," he said.
But senior government sources said: "Local authorities have been given pounds 1.1bn extra this year. The cost of this settlement is less than half that extra money. There is another pounds 160m on top of that to reduce class sizes."
The overall pay bill will go up by 3.6 per cent. The pay of a newly qualified graduate outside London will rise from pounds 15,012 to pounds 15,537 from April. From September the head teacher of a typical small primary school will receive pounds 33,552, up from pounds 30,651, and the head of a large secondary will earn pounds 57,570 compared with pounds 54,552 now.
Secondary school head teachers will be able to earn up to pounds 70,000 but all head teachers' pay will be more closely linked to performance.
The Liberal Democrat education spokesman, Don Foster, said: "This award will not help keep good teachers, let alone persuade keen young graduates to enter the profession."
The Conservative education spokesman, David Willetts, added: "We welcome this settlement, but we need to be clear about how it is funded.
"David Blunkett [the Secretary of State for Education and Employment] goes around bragging about how much he puts into education, but not much of it is reaching local authorities and schools."
Mr Blunkett said that the Green Paper on performance-related pay to be implemented next year would "make the teaching profession better paid and more attractive - with the opportunity of initial increases of up to 10 per cent based on performance and assessment".
Union leaders attacked the pay deal, and said that the plans for performance- related pay would do nothing to improve recruitment in the profession.
Peter Smith, leader of the Association of Teachers and Lecturers, said: "They will see this against the background of an inadequate pay award, which does precious little to address recruitment or retention of teachers apart from for heads of relatively small primary schools. We step forward into the new millennium by harking back to a failed history."
Nigel de Gruchy, general secretary of the National Association of Schoolmasters Union of Women Teachers, said he was "very disappointed" with the proposals. "They are going to have to change the proposals or there's no agreement," he said.
John Dunford, general secretary of the Secondary Heads Association, said: "If we are introducing a major new system of appraisal for every teacher every year, that raises major questions about whether it is manageable and whether it will adversely affect the rest of schools' work."
Doug McAvoy, general secretary of the National Union of Teachers, insisted that "teachers want pay, not peerages" and called for a joint campaign to bring home to the Government the problems caused by shortages in classroom staff.
"That campaign could lead to direct action on class sizes, on cover for absences and on the increased workload teachers face. Direct action becomes more likely while the Government maintains its complacency towards teacher shortages and hostility towards teachers," Mr McAvoy said.
However, David Hart, general secretary of the National Association of Head Teachers, welcomed the announcement.
"Those who criticise the pay award to heads are disingenuous, because all concerned knew that head teachers were being dealt with separately this year," he said.
The Primary Head
Twenty-two years' experience as a head teacher has brought Sheila Wainwright a salary of pounds 30,000 a year. The pay deal will add anything from pounds 1,800 to pounds 2,700.
Mrs Wainwright, who is responsible for 15 staff and 180 children at St John's Church of England Primary School in Dewsbury, West Yorkshire, is pleased with the rise announced yesterday and hopes it will herald a decent pay rise for classroom staff.
"The increase is most welcome, and we have to see it hopefully as a first step towards increasing rewards for the whole profession. Recently pay has not acknowledged the increase in responsibility we have as heads... the increase in responsibility in the past five years has been astonishing. It is hard to say what is going to happen, but we are going to have make many more decisions about performance-related pay in particular.
"Head teachers deserve a reward. We need to acknowledge that heads have a tremendous workload."
The Primary Teacher
Ralph Surman, 34, is not impressed by the 3.5 per cent pay award to classroom teachers. He has been working at Cantrell Primary School in Nottingham for 12 years, and stands to gain pounds 770 on top of the pounds 22,000- a-year salary that is the average for primary school staff.
"People will be disappointed," he said. "They will think that a courageous government would have put its hands in its pockets and given teachers what they deserve to close the gap with similar jobs. I don't think this bodes well for teachers in the classroom, who are raising standards across the country."
He does not begrudge heads their rise, but fears ministers are placating school managers to smooth the introduction of performance-related pay. "I think people will see a link with the Green Paper on pay and conditions. I wonder whether this is a settlement by which the Government will bring in performance-related pay by buying head teachers off," he said.Reuse content