Blair faces cabinet row over fast-track cash

Tony Blair is facing a cabinet row over his moves to bypass local and health authorities to channel extra money directly to frontline services in health and education.

John Prescott, the Deputy Prime Minister, has expressed concern about the "frontline first" initiative. Although he backed the decision to hand up to £50,000 direct to headteachers, he warned that if the policy was extended it would raise questions about the future role of local education authorities.

"It's a good thing to do, but there may be arguments and controversies if it becomes a trend," Mr Prescott told a private meeting of Labour backbench leaders last week, whose minutes were leaked to The Independent. This is the first sign of cabinet-level tension over the policy. Mr Blair is frustrated that voters have been slow to "see the difference" from extra money pumped into public services. It is understood Mr Prescott regards the schools cash boost as a one-off, while Mr Blair's advisers want to see it repeated.

Local and health authorities are worried, and have accused ministers of "centralisation". A government source said Mr Prescott was articulating the concern of councils, which are his responsibility as Secretary of State for the Environment, Transport and the Regions.

Allies of the Deputy Prime Minister said yesterday he would adopt a totally different approach to that of David Blunkett, the Education Secretary, and Alan Milburn, the Health Secretary, who has announced plans to channel £600m into improving frontline health care. They said Mr Prescott wants to give local authorities a greater share of his transport budget.

Labour MPs have been anxious that the extra £40bn for education and health announced two years ago has made little public impact. However, Labour's private polls suggest that the extra money in the Budget for health and education has been well received, although voters want to see it translated into improved services.