Clarke plan to give funds directly to headteachers

Charles Clarke is drawing up "radical" plans to prevent a crisis in school funding by proposing three-year finance deals paid directly to headteachers.

The plans to bypass the local education authorities (LEAs) come after a long-running row over school funding in which comprehensives complained they did not get the extra money promised by the Government.

The Department for Education yesterday confirmed that talks were taking place, prompted by Mr Clarke and backed by Tony Blair, to avert further problems.

The proposals to fund schools directly will provoke those who oppose similar policies for the health service. The fear is that without the filter of local authorities, some schools will prosper at the expense of others.

The Labour Party has made clear its hostility to any shift towards direct funding of public services.

Mr Clarke was furious after the Government put record funding - an 11.6 per cent rise - into all 25,000 schools, yet some did not receive the money. Some schools have been forced to make staff cuts and have even threatened to work to a four-day week.

The Government blames the LEAs, claiming the funds were allocated but not passed on. However, ministers admitthis year's budget is "tighter" than the other two in the three-year funding cycle. Among other things, schools will have to adapt to changes in teachers' pensions and to raised national insurance contributions. Whitehall sources did not rule out more cash, beyond that arranged by the Chancellor, Gordon Brown, to ease the pressure next year. But it appears likely now that any money will be administered by a central agency.

A Whitehall source said extra money was "going in next year". This year's problems, however, "make the case for radical reforms".

"We will analyse the problems this year, then prescribe the medicine," the source added. "More money is going into the system, so it is frustrating that schools are not enjoying the benefit."