Leading Article: A hollow victory in the classroom

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Parents, teachers and governors must be as muddled as ever about funding for schools. The Chancellor, Kenneth Clarke, says that education will get an extra pounds 878m next year - a sum that should, in theory, more than make up for inflation. Yet local authorities deny that the settlement allows them to do more than tread water. They say that they will not be able make a real increase in spending on schools - unless council taxes rise.

Who is right? Education has done pretty well in the Budget, considerably better than other areas of spending. But Mr Clarke has used smoke and mirrors to obscure what is really going on. The overall grant to local authorities is only going up in line with inflation. So the price of Mr Clarke's generosity to schools is that the grant for other local authority services now lags behind inflation. Given that councils are unwilling to rob Peter to pay Paul, Mr Clarke has effectively done no more than fund the status quo.

But the status quo is not good enough. Leaking roofs, empty bookshelves and equipment shortages speak of schools that desperately need extra resources. Teachers are so demoralised that they do not deliver the standards we need. A fresh approach is called for. As we argued yesterday, good teachers should be better paid, bad teachers should be removed or retrained.

Where should the money come from? Yesterday the Government eased capping restrictions: local authorities will be able to raise the council tax to pay for extra expenditure on schools. This is a welcome development - local people ought to be able to vote to pay extra and spend extra on education. But this is not the whole answer. If schools were primarily financed by people living within a neighbourhood, then, as in the United States, poor areas would get poor schools.

If national government is to take the strain without raising taxes across the board, something else must give. Mr Clarke missed the chance to shift funding away from higher education and towards primary and secondary schools. Only 30 per cent of teenagers enter higher education. As graduates earning higher wages, they benefit considerably from their university training. It seems only fair, faced with a paucity of resources, that graduates should help to foot the bill for their privileges. A graduate tax is a good answer: it would help free up resources for the basic schooling that everyone needs.

In the absence of such radical action, the desperate and obvious inadequacies of state education will go unaddressed for yet another year. The Government may have an easier time than over the past 12 months. Protests from teachers may ebb, since their jobs should be safe. But the concern of parents is unlikely to abate and the potential of the nation's children will continue to be wasted.