The government has taken the centralisation route to preventing another schools funding crisis, with a new national formula that significantly reduces council discretion over education spending.
Under the system announcedby education secretary Charles Clarke on Wednesday, councils will be forced to passport minimum increases of at least 4% to all 25,000 schools in 2004-05, except in highly exceptional circumstances.
The payback for local government is that councils will be guaranteed grant increases in excess of the formula to give them some flexibility to help schools in most need.
Mr Clarke promised funding increases of between 5% and 6.5% per pupil but said 'unavoidable cost pressures' would grow by around 3.4% for the average school, less than the proposed formula.
For instance, ministers are expecting next month's teacher pay settlement to propose a base increase of 2.5%, removing one of the key cost pressures that triggered this year's crisis.
In theory, this should remove the need for councils to make up government shortfalls for education funding from council tax.
But the Local Government Association has warned the extra funding should not come at the expense of other services in next month's council funding settlement.
The government has promised transitional grants over two years for some education departments to help schools in particular need, and targeted support of £120m for those councils who receive the smallest cash increases in 2004-05 and 2005-06.
LGA chairman Sir Jeremy Beecham (Lab) welcomed the guaranteed grant levels and targeted extra funding, which he said had arisen from 'constructive dialogue' between local and central government.
But he said: 'We must tread wi th great caution. The government's financial assumptions and centralisation leave little room for manoeuvre either to meet councils' or schools' particular circumstances.'
LGA director of education and social policy John Ransford said it was reasonable for the government to expect full passporting if it covered the cost.
He said: 'If [Charles Clarke] is producing the cash increase then the passporting becomes easier.
'What he is saying is that councils must play fair. We have always said we would.
'But the teachers pay award must be within the assumptions made.'
LGA Liberal Democrat leader Chris Clarke described the proposals as a 'disaster for education funding'. He added: 'By ring-fencing money for schools and taking nearly all flexibility out of the system, school and pupil services will be hit across the country.'
The education secretary's decision to move his announcement forward to give schools time to plan budgets was welcomed by one of the councils in this year's crisis, Croydon LBC, which is expected to receive a transitional grant of £2.6m next year.
Louisa Woodley (Lab), cabinet member for education, youth and life-long learning, said: 'We are pleased at the transitional funding available as it acknowledges the pressures Croydon faces.'