Council chiefs have criticised the Government’s proposed new funding formula for schools, arguing it will lead to ‘significant reductions’ at a time when state schools face huge debts.

The education secretary Justine Greening yesterday announced the publication of the new funding formula which, she claimed, would eliminate the ‘postcode lottery in school funding’.

She said the current system for distributing funds was ‘unfair, opaque and outdated’, and left students with similar needs receiving different levels of funding due to their locations.

Under the proposed new formula, which will be introduced from 2018 to 2019, more than 10,000 schools will gain funding.

Ms Greening also assured critics that significant protections had been built into the formula so that no school will face a reduction of more than 1.5% per pupil per year or 3% per pupil overall.

For pupils with high-level special educational needs, no area will see their funding reduced.

‘Our proposed reforms will mean an end to historical unfairness and underfunding for certain schools,’ said the education secretary.

‘We need a system that funds schools according to the needs of their pupils rather than their postcode, levelling the playing field and giving parents the confidence that every child will have an equal opportunity to reach their full potential.’

The Local Government Association (LGA) welcomed the extra cash for some schools but warned the new formula would result in losses for others.

‘Councils have long called for a fairer funding system for all schools. It hasn’t been right that pupils with similar needs can receive such different funding depending on where they live,’ said Cllr Richard Watts, chair of the LGA’s Children and Young People Board.

‘However, whilst an injection of extra money for some schools will be fantastic news, others will see significant reductions. It is absolutely essential that the new formula is phased in over time to protect those schools that will face these reductions.’

Cllr Watts said reductions in funding would be particularly difficult for schools to cope with given the National Audit Office’s warning English state schools will have to find £3bn in savings by 2019-20.

Jon Richards, the head of education at the union Unison, also warned the new formula would mean cuts.

‘Schools that are already underfunded will get much less than they'd hoped for,’ he said.

‘Other highly rated schools in better resourced areas will see their budgets cut further still to fund those currently failing.

‘Good education doesn't come cheap. Schools need proper investment. Heads should not be forced to compete against each other to give children a decent future.’

The County Councils Network (CCN) welcomed the announcement and pointed out county schools in particular lost out under the current system of funding.

‘By the Government’s own admission, the current schools distributional formula is outdated and unfair. For instance, county schools receive half the funding per pupil that inner London schools get. This is inequitable and needs redressing,’ said Cllr Paul Carter, chairman of the CCN.

‘Counties welcome the consultation on the new funding formula and look forward to engaging in the detail. We will work with the Government to ensure that funding to schools in all four corners of the country are fair and allow us to build on our already high standards.’