The funding of education is routinely described in terms such as "fiendishly complex". This is a simplified outline.

The resources come in three main parts: formula funding and the Standards Fund, which go via local education authorities (LEAs), and direct grants to schools, confusingly called the School Standards Grant - and which actually goes via LEAs as well except that they are not allowed to touch it.

This is in two "blocks": for schools, and for LEAs for their centrally-run activities.

How the schools block is calculated

There is a basic amount per pupil across the country - except that it varies depending on children's age groups.

The government has promised that each school get at least 4% more for 2004-05 per pupil in cash terms than it had in 2003-04.

To this is added, first, an amount within each age group for "additional educational needs" - to deal with special needs, truancy and exclusions - multiplied by the estimated number of pupils involved, over and above a basic threshold.

For primary schools, add on a share for "sparsity". This is to reflect the higher cost of maintaining a larger number of small primary schools in authorities with relatively sparse populations.

There is also a separate element for "high cost pupils" - such as those in special schools, hospital schools and pupil referral units.

The totals so far are then multiplied by what is called the "area cost adjustment". This is about the extra costs of recruiting and keeping staff in different parts of the country.

How the education authority block is calculated

Education funding is not only about schools-related administration - the government is very keen on the youth service, for instance.

The funding for LEAs reflects this by having two strands.

In both, there are funds related to the number of children in the area - who might be at schools within the LEA or outside it - and the number of pupils in its schools, some of whom might be from outside the LEA.

The funds relate to various functions an LEA has to perform, such as strategic management, school admissions, premises and staffing management, special needs and welfare arrangements, raising standards and pupil transport.

Added to that are sums related to the numbers locally claiming Income Support - to reflect the additional needs of deprived areas.

Then for the central functions, as with the schools' share, there is a factor for population sparsity.

In the community and youth strand there is a sum designed to help under-performing ethnic minority groups.

Totals so far are multiplied by the area cost adjustment.

Finally an amount is added for fixed costs, based on the belief that every LEA whatever its size needs a core staff.

Adding it up

The total of these two blocks of money is known as the LEA's education formula spending share.

The Education Secretary, Charles Clarke, said this would be at least 5% more for 2004-05 than for 2003-04.

So now the LEA has its share of the total pot, partly for its own activities and partly to be passed on to schools.

The most important extra central source of income - and in 2003, part of the row over budget shortfalls.

The fund is to raise standards - covering numerous headings such as reducing infant class sizes.

But for 2003-04 the government took some items out of this fund and put them into the formula share - the class sizes money and money for nursery education.

And - crucially - �335m covering four headings was removed from the fund altogether.

This used to pay for the induction of newly-qualified teachers, support for pupil "inclusion" - those with behavioural problems, for instance; school improvement - such as the literacy and numeracy strategies - and the cost of administering the teachers' performance pay scheme.

In response to protests, the government put back �800m to reverse planned cuts in standard fund grant over the next two years.

Money which the Chancellor, Gordon Brown, said was to go direct to head teachers to spend as they wished.

The amount each school gets depends on whether it is a primary or secondary school and how many pupils it has.

Where the money goes

So each LEA has an amount for formula funding and the Standards Fund as part of its overall grant from central government.

It also decides how much to raise through the local council tax.

It then decides how much of the total it is going to spend on education services and, within that, how much of the formula funding will be for pupils, via the schools block.

The Local Government Association makes the point that many councils in fact spend more on education than they are expected to, raising the extra themselves.

Ministers and local officials routinely get into arguments about how much of any increase the government intends for schools is actually passed on to them - known as "passporting".

Despite the name, part of the "schools" block - confusingly - is for LEA functions as explained above.

But the rest of it is allocated to individual schools along with a share of the Standards Fund. Each LEA has its own way of doing this.

This will not all necessarily be in one go - and another part of the row in 2003 was about how much that was due to be devolved in this way was actually allocated to individual schools and when.

The government made new regulations in 2004 to make sure that LEAs' spending on their central education budgets did not rise faster than spending on schools.