The money comes alongside a set of reforms which must be implemented

Primary school head teachers will receive an increase in core funding of 4% for the year 2006/07, while secondary school heads will get a rise of 3.4%.

A further 3.7% rise will be given for the following year.

For local authorities, which allocate budgets, this will mean a 6.8% rise next year and a 6.7% rise the next.

The government wants to see the money put towards delivering key reforms, including those set out in the White Papers about school and 14 to 19 education.

These include greater personalisation of learning at Key Stage 3 and in primary schools to support provision for catch-up classes and greater stretch for gifted and talented pupils, as well as help for pupils from disadvantaged backgrounds.

There must be support for more practical learning options for pupils aged 14-16 to "maintain their engagement in learning".

The costs of workforce reform in primary schools must be met and resources must be found to meet the increased entitlement to free early years provision from 33 to 38 weeks announced in the ten year childcare strategy.

Schools Minister Jacqui Smith said it was a record settlement: "This demonstrates the continuing high priority the government gives to schools.

"We have acted to ensure that every school, whatever its location, will benefit from the substantial increases in funding the government has committed to education," she said.

"The settlement gives schools the secure and predictable base they need to deliver a wider and more personalised offer to all their pupils."

'Welcome increase'

The Secondary Heads Association broadly welcomed the announcement, but said they were disappointed that the minimum guaranteed funding level had been set at 3.4% for secondary schools - less than that of primaries.

"Overall this is a welcome increase for school budgets for the next two years," Sha's general secretary Dr John Dunford.

"However, the minimum funding guarantee of 3.4% is lower than secondary schools were expecting and considerably lower than is needed to meet increased costs."

Dr Dunford said the government had placed "significant financial" demands on schools this year with initiatives such as personalised learning, staff restructuring and workforce reform.

Education spokeswoman for the Local Government Association, Alison King said: "It's great that more money is going into schools, and schools need greater certainty over their budgets.

"But a child's development continues outside the classroom, and for years after some of them leave school.

"Other council services vital to helping children reach their potential have not enjoyed such a generous increase."