One is the "area cost adjustment". Essentially, this gives additional sums to authorities in the south-east of England, where living costs are higher than in the rest of the country.

Complications soon set in

The other element is for "additional educational needs". This takes into account such things as relative social deprivation.

When councils get these additional sums they do not necessarily spend them in the parts of their area to which they relate.

A local authority takes the all money it has been given and allocates it to schools on the basis of another formula. Rules and regulations limit the way it decides this.

Differentials

A proportion relates to pupil numbers in a school, with more for older children. There is some latitude for such things as level of social deprivation and the need for home-school transport.

Don't ask, don't get

One of the most contentious parts of the whole system is that "area cost adjustment" for the South-East, which is itself weighted differently between London and the councils bordering it - those in the capital get more.

Then there is a sudden cut-off at the edge of the fringe, which is why schools in Hertfordshire get more than those in Cambridgeshire, for example, even those that are only a few miles apart and with similar costs.

"That differential is entirely at the discretion of the government," said the deputy director of local government finance at the Local Government Association, Mike Grealy.

"The government actually reviewed the grant distribution mechanism a couple of years ago - there were major pieces of work in relation to additional educational needs and the area cost adjustment - and simply refused to make any changes.

"It is obviously not happy with it but it hasn't changed it."

Competing for more

Schools also get money for specific purposes in the form of grants direct from government, which local education authorities have to bid for, such as Standards Fund money for "advanced skills teachers".

And other sums depend on a local authority - either alone or in partnership with other councils or outside organisations - putting together a successful bid for part of a limited central pot.

For example, a council can only get its schools money for part of the National Grid for Learning if it has been part of a successful bid in a consortium with others.

Parents hear ministers announcing money to give schools fast connections to the internet - but their child's school might not see any of it.

Finally, as of April 2000, schools are getting money from the government to spend as they wish, from �3,000 to �40,000 based simply on the number and age of their pupils.

It is a radical change.