Schools' budgets could be cut next year to bail out other cash-strapped departments of the City of York Council.

The education department's budget is already facing a shortfall of at least £200,000, just to cover inflationary costs like fuel, teachers' pay rises and rising pupil numbers.

These increases amount to £3 million, and will be even higher if the teachers' pay rise is more than 3.3 per cent.

The Government has set the increase in the department's standard spending assessment (SSA), the maximum it can spend, at £2.8 million.

The shortfall will increase to £920,000 if the department also goes ahead with plans to match Government Standards Funds grants, for teaching and classroom developments, and proposed new initiatives.

Education finance manager Robert Beane told members of the Liberal Democrats' Shadow Executive that efficiency savings alone would not pay for the shortfall and "service reductions" would need to be considered.

But Simon Wiles, head of financial services, said the picture was worse for other departments. He said: "There has been a huge increase in direct funding from the Government for schools this year. The question is whether to fully fund schools for fuel inflation and pay inflation when they have got some other sources of income for that now.

"It is not possible for the council to meet all these requirements - the total education settlement would be four per cent plus, but social services is facing 1 per cent, which isn't enough to cover inflation. The council has got to run as one council.

"Having said that, we would want to make sure education gets what the Government says is its fair share."

Chris Edwards, acting education director, said the Department for Education and Employment had told them it expected the whole of the education SSA to be spent on education.

Mr Edwards said schools across York were holding about £3.2 million between them in their reserves. Officers were encouraging them to spend that, but it was the schools' money, not the council's.

Both the Liberal Democrat and ruling Labour group's budget proposals are set to be revealed in full next month. Coun Peter Vaughan, shadow executive member for education, said: "We are determined that any education proposals must not result in the cheapening of the quality of service provided to our children."

Coun Janet Looker, Labour's executive member for education, said: "It is a very difficult issue.

"There are a lot of areas that are very strapped for cash and the council is facing a very tight budget settlement across every single budget service."

Updated: 13:29 Thursday, January 25, 2001