Hundreds of teachers have lost their jobs

Head teachers in England were left with deficits of up to �500,000 each, despite a �2.7bn overall increase in funding from Whitehall.

Ministers and local councils accused each other of withholding cash.

In a report, the Commons education select committee calls for greater "clarity" within the system.

'Forlorn hope'

It also recommends that the Department for Education and Skills (DfES) carries out a survey of authorities to gauge local situations.

The government was attempting "to implement the funding changes without knowing how schools would be affected".

Ministers changed the schools funding formula this year.

Schools also had to cope with higher wage bills, the Workload Agreement - which takes certain administrative and other day-to-day tasks out of teachers' hands - and higher pension and National Insurance contributions.

The report adds: "The Government had hoped that the new system of funding would be easier to understand than the old, and therefore would bring clarity.

"This year's events suggest not only that that has not happened, but that it might be a forlorn hope, given the variables that the formula is attempting to reconcile.

'Grounds for concern'

"However, earlier announcement of decisions on education financing brings some welcome certainty for schools and LEAs, and we expect the government to continue to pursue this aim."

Head teachers are being promised a minimum cash increase of 4% for the next financial year. This assumes their costs will rise by 3.4%.

The government has also announced an extra �120m to help balance budgets.

However, the committee's report raises several "grounds for concern".

These include a rise in inflation and a predicted increase in schools' fixed costs over the next year.

Earlier this year, Education Secretary Charles Clarke said "bad management" had been a "factor" in some schools' problems.

DfES officials estimated "over �590m" had not been passed on to schools by local authorities.

But councils said they had not received large amounts of the money in the first place.

Hundreds of staff were lost as a result of the problems.

The report says: "For the future, if the government intends to continue to seek greater control over the detailed distribution of funding to schools, it needs a far superior information system, which needs to be predictive.

"If it is unable to achieve that, the government needs to understand the limitations under which it is operating, and so be more cautious about what it promises on schools funding."

School standards minister David Miliband said: "We will consider their recommendations carefully and make a full response in due course."

He added: "Our goal is funding stability and predictability for schools. The long-term settlement of teachers' pay is a big step forward.