Schools may be `paid by results'
Those which reach government targets for test and exam results, cutting truancy and expulsions would be entitled to more money.
There would also be rewards for schools with improving results. Head teachers in the schools would then have to decide which teachers should receive more pay.
The system of "payment by results" has not been used since the end of the last century when it was abandoned after complaints that teachers were "teaching to the test".
Conservatives considered paying school sixth forms by results before the last election but dropped the idea.
If the plans are agreed, they will form part of a government Green Paper to be published next month, which is likely to propose performance-related pay for individual teachers.
The biggest teaching union, the National Union of Teachers, has threatened industrial action if payment by results is introduced. Doug McAvoy, the union's general secretary ,said: "Teachers' pay should be fair and equitable. It should not be divisive and it should ensure that teachers doing the same job are paid the same.
"Measures of quality of teachers cannot be based on pupils' results. These results are influenced by factors external to a school and external to individual teachers."
But the Association of Teachers and Lecturers welcomed the idea of schools receiving extra cash in recognition of their success.
Peter Smith, its general secretary, said: "What's wrong with the country investing in success, given that we ensure that less successful schools are getting the money they need, too."
David Blunkett, the Secretary of State for Education, has ruled out the idea of crude "payment by results" for individual teachers. The Green Paper is expected to propose a new salary structure for teachers based on a tougher system of appraisal.
Gordon Brown, the Chancellor of the Exchequer, wants a clear link to be established between pay and performance in return for the pounds 19bn extra promised for schools over the next three years.
The National Association of Head Teachers is proposing that classroom teachers should be able to earn an extra pounds 8,000 without taking on extra responsibilities.
Heads would decide which teachers should receive the money, subject to external checks.
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