School budget surpluses climbdown

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Education minister Jim Knight said teachers had raised "reasonable concerns" over the move, which had been intended to free up £1.7bn in unspent reserves.

In a written statement to the Commons, Mr Knight said he had "listened carefully".

"Rather than proceed now we will continue to discuss these detailed concerns with schools and work with local authorities to lower excessive surplus revenue balances," he added.

The proposals drew a furious response after they were set out in a consultation paper in March. Teachers' organisations and the Tories warned they would penalise prudent financial management, and unfairly fine schools saving for new buildings and other major projects.

Doubts were also raised over assurances that the funds would be handed back to local authorities for their education budgets, and the retrospective nature of the measure.

The original plan was for schools to hand over 5% of their balance as of last April - even if they were now in the red.

Challenging Gordon Brown on the issue at Prime Minister's Questions last week, Tory leader David Cameron said: "Why do you think you know best how to spend this money, rather than the head teachers?"

Mr Knight confirmed on Tuesday that the retrospective aspect of the proposals had been "ruled out".

"I know that where schools retain a small surplus, they are using sound financial management, such as putting money aside for extra staffing costs the following year or against unforeseen changes," he said.