The School Standards Minister, Estelle Morris, said schools in England would take responsibility for �1bn of spending currently held by local education authorities.

Estelle Morris has given greater spending power to individual schools

"This is the biggest and most wide-ranging extension of financial decision making to schools since the introduction of local management to schools," she said.

But the Conservative Party said the announcement did not live up to the government's own promise to give schools 100% control of their budgets - and a teachers' union said the move was merely "a book-keeping adjustment".

From 1999, schools will be able to take charge of building repairs, maintenance and insurance - services that have until now been provided centrally.

In the following year, schools will be able to further loosen links with town halls, gaining the right to set up their own staff pay rolls, arrange long-term supply cover and make their own school meals arrangements.

The Welsh Education Minister, Peter Hain, later announced a similar move in Wales, potentially delegating an extra �100m to schools there from April 2000.

He said no efficiently-run local education authority should fear that it would lose out. under the reform.

"Instead, it should put pressure on councils to improve the quality of their services to schools," he said.

David Hart says financial power should be with schools

The decision to extend the local management of schools, introduced by the previous Conservative government, is intended to ensure that as much of the education budget as possible reaches schools, cutting out the administrative costs of local government.

The Shadow Schools Minister, Theresa May, said: "Not so long ago, the government was telling us that schools were going to get 100% of their budget to manage themselves. Where is that 100% now?

"By not setting a target for the budget that must be delegated to schools, the government has opened up the risk that local authorities will hold back even more than they do today."

Estelle Morris's announcement follows the proposals put forward earlier this year in the consultation paper, Fair Funding: Improving Delegation to Schools.

Details awaited

Her announcement was given a cautious welcome by the Local Government Association, representing local authorities. It does not support the delegation of building repairs nor the provision of extra money for grant maintained schools.

The chair of its education committee, Councillor Graham Lane, said: "Local authorities will work to do all that they can to make a success of these plans and we await further details with great interest.

"What the government must do is make absolutely clear what the local education authority is responsible for and what schools must do."

Cost versus quality

Headteachers welcomed the greater flexibility.

"It must be right that schools should be responsible for making decisions about how their budgets can be best used," said the General Secretary of the National Association of Head Teachers, David Hart.

Doug McAvoy says schools need more money

"Nevertheless, it will still be necessary to make sure that local education authorities do not retain any more money than absolutely necessary."

The National Union of Teachers has been less keen.

"Schools need new money, not recycled money. The government's approach ignores the benefits of economies of scale," said the union's General Secretary, Doug McAvoy.

"Increased delegation of budgets could lead to schools buying on the basis of cost rather than quality."

And the Association of Teachers and Lecturers called the switch of money "true but seriously misleading".

"The crisis in the education service is not the result of who makes the spending decisions but of the amount of money actually available," said its General Secretary, Peter Smith.

"The government should not be allowed to boast a �1bn bonanza when in reality it is a book-keeping adjustment."

Performance tables

Local education authorities will come under closer scrutiny from next year, with Estelle Morris also announcing the publication of performance tables on how authorities fund their remaining education services.