£700m spent on exams every year

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Exam boards charge more than £400 million per year in fees, while at least £300 million is spent on invigilators and other staff to manage the tests in schools.

Headteachers warned that the "bloated" system needed to be severely cut back as schools now spend far more on exams than books.

The study for the Qualifications and Curriculum Authority warned that the exam system in England, Wales and Northern Ireland was likely to have become inefficient in recent years.

The report, by Europe Economics, said: "Over time the system almost certainly has engendered inefficiency and in our view is likely to go on doing so. Unless action is taken, the burden on taxpayers will increase."

The report continued: "Schools and college representatives were vocal in their criticisms of the rate at which exam fee expenditure had risen in the last few years.

"One interviewee cited a case where exam fee costs at one school had risen over five years from £30,000 per annum to £100,000 for an unchanged number of pupils."

But this did not take into account whether the pupils were taking more exams than in the past, the study said.

John Dunford, general secretary of the Association of School and College Leaders, said headteachers now spend more on exams than books or computer equipment.

"This is a desperately bad use of public money. It has become the second biggest item after staffing in most secondary school and college budgets," he said.