Start here.

What's this fuss about 'missing millions'?

Specifically, �500m. That's the amount the government says local education authorities (LEAs) in England have not passed on to schools.

There are 150 LEAs and ministers say that, on the basis of returns from 70 of them, the amounts held back range from �2m to �10m.

And they say 40% of LEAs have put a fifth of the increase they have been given into centrally-administered areas of their budgeting, such as providing for children with special educational needs, and capital programmes.

The Local Government Association agrees �500m is missing but says its members haven't got it.

But there has been more money?

Yes. In last summer's spending review the Chancellor announced a 9% increase above inflation in education spending for 2003/04. So of course head teachers were expecting a windfall.

Strip out the costs of higher and further education, capital programmes and several other centrally-funded projects, and that fell to 6%.

This increase was passed to local authorities through a new "Education Formula Funding Grant".

This is where it starts to get complicated.

Different areas get different amounts depending on criteria produced by the Treasury and the Department for Education and Skills (DfES), taking account of such things as local deprivation.

To prevent dramatic swings in their funding the government introduced the concept of a minimum "floor" of a 3.5% rise and a maximum "ceiling" of 7%.

But the 3.5% floor was substantially less than the average 6% the government said most authorities would get.

Not all the money comes from the central pot. Some authorities choose to put in more than they are obliged to, funding it from the local council tax.

At school level it is even more complicated because LEAs accord different values to different schools and to different sets of pupils.

Under this so-called "fair funding formula", individual schools get individual allocations.

So some have had less than the government announced and in some cases even less than they did last year.

Other changes

The change in the LEA funding system comes at the same time as the 2.9% teachers' pay rise, 1% increase in employers' National Insurance contributions and 5% rise in pension contributions.

Staff costs account for the vast majority of any school's budget - perhaps as much as 94% in smaller schools.

Other changes this year have further confused the picture.

The Secondary Heads Association lists them like this:

• absorption into core budgets of some Standards Fund categories
• the second year of phasing in the Learning and Skills Council system for post-16 funding
• grants for performance pay that do not meet schools' commitments
• the continuing effects of reducing the number of steps in the main pay scale for teachers
• a new "and very expensive" pay structure in London
• the move to a unified pay scale for support staff.

This was intended to increase their general funding for schooling to at least 3.2% per pupil - still lower than the 3.5% "floor".

What's going to happen now?

Charles Clarke has said that - once the local elections are out of the way - he is going to get full accounts from all LEAs of what they have had and where it has gone.

If necessary he will try to provide a bit more money.

But he also said he wasn't going to have this sort of row again - and made a thinly-veiled threat to cut LEAs out of the funding system.

In the meantime, some head teachers are facing tough decisions - and will be asking their parents' associations for even more help than usual.