Education secretary Charles Clarke has announced a complex package to avoid a repeat of this year's school funding crisis. A real-terms teachers' pay freeze will help guarantee schools minimum cash increases. And councils will have to devolve more cash to head teachers.
Mr Clarke's announcement came earlier than usual to allow heads to plan their budgets in advance of the new financial year, and to resolve problems in time. City accountants KPMG will help schools struggling to balance the books - and will enable the government to judge the merits of those who complain of inadequate funding.
Many schools faced serious problems this year. School spending rose by 11.6%, but increases were unevenly spread because of a new local government funding formula. And many councils in the south-east found their funding inadequate to cover rising teachers pay, national insurance increases, pension adjustments and the loss of some targeted funding.
Most of these costs are absent in 2004-05. So, although average pupil spending only rises a further 5.5%, ministers have taken steps to avoid further problems. Unlike 2003-04, per pupil increases are being guaranteed at school as well as education department level. Every school will get at least 4% more per pupil - or 3.4% where rolls are rising. Education departments will receive a minimum 5% per pupil increase - some will get 6.5%. Education departments can also secure advances on future funding from the Department for Education & Skills.
Schools welcomed Mr Clarke's decision to increase the Standards Fund, which pays for school improvement and to increase direct payments to schools. Money which had been diverted from the fund to the general pot in 2003-04 hit inner city schools badly. And councils like Kent and Essex CCs, which pleaded hardship this year will be helped by a £120m transitional grant. 'The transitional funding is more generous than we originally expected,' says George Phipson, adviser on school funding to the National Association of Head Teachers.
However, heads say the package does nothing to compensate schools that have gone into deficit in 2003-04 or have used their reserves to balance the books.
'There may be some headroom for pay pressures and workforce remodelling,' says Mr Phipson. 'But there are many pre-calls on that money, so there will be nothing left over to replenish reserves.'
And local government leaders fear education may gain at the expense of their other activities. 'The sensible planning of local education can only be done in conjunction with spending decisions that take account of local needs and are integrated with other local services, such as social services,' says Sir Jeremy Beecham (Lab), chairman of the Local Government Association.
And despite the insistence of ministers that there is no reason for exorbitant tax rises, as the extra money for schools will be paid in grant to councils, this is unlikely to prevent many councils from imposing further double-digit council tax rises next year. However, the biggest difficulties may be with teachers. Teaching unions complain the package requires a tight pay settlement and will make it difficult for their members to benefit from a new agreement designed to reduce their working hours.
'The government intends that progress on the upper pay scale will be rationed and that all teachers will suffer a pay freeze until September 2006,' says Doug McAvoy, general secretary of the National Union of Teachers. 'There is insufficient money to employ the additional teachers necessary to implement the workload agreement.'
Teachers are paid incrementally for their first five years up to £26,460 a year - outside London. By September 2005 this will rise to £28,005. After five years, they can apply to cross a 'performance threshold'. If successful, they receive a £2,200 bonus, but can also access an upper pay scale with the chance to earn up to £33,150 (over £35,082 by 2005) - or over £39,000 in inner London (£41,000 by 2005).
Ministers believe upper scale awards should only go to the best teachers. But, over 90% of eligible staff were awarded the performance bonuses at upper level two. Next year's funding would only allow 30% of 100,000 eligible teachers to access level three. Government advisers say extra money could be provided to increase that percentage if the unions accept these rises are for exceptional merit not just teachers doing their jobs well.
This will mean tough bargaining. Nor is this the only potential flashpoint with the unions. Problems may arise in 2005-06, when teachers are due to swap 10% of their teaching time for lesson preparation time, a commitment that requires costly cover, particularly in primary schools.
But schools may be unable to afford to employ more teachers or teaching assistants to provide such cover. Indeed, teaching assistants are expecting to gain from new pay scales in many areas in 2004-05, when the government expects their pay bill to rise by 4.3%. If the rises are higher, some schools may lose assistants.
Nevertheless, head teachers recognise that the early announcement of the new arrangements could prove beneficial. 'If problems occur this year, this more transparent system should enable the cause to be more easily identified,' says Dr John Dunford, general secretary of the Secondary Heads Association. However, education departments may not make final decisions until they see the results of the pupil census in January.
Mr Clarke has sensibly adopted the sort of measures that could have avoided the difficulties caused by the 2003-04 settlement. However the complexity of school funding means there are no guarantees he can avoid further problems in 2004-05 and 2005-06.