Schools are hoarding hundreds of millions of pounds while sacking experienced teachers and increasing class sizes, according to a teachers' union.

The National Association of Schoolmasters/Union of Women Teachers (NASUWT) says more than £545m is being held in the coffers of schools across England and Wales at the expense of educational standards.

It blames the "disastrous" system which has devolved financial power to schools and allowed them to make decisions on how to spend the majority of their budgets.

The Local Management of Schools (LMS) regulations, introduced in 1990 and due to be extended by the present government, have removed most school spending decisions from local councils and passed them to school headteachers and governors.

Delegates at the NASUWT's annual conference in Eastbourne were told that the system encouraged schools to hold excessive amounts of money "for a rainy day" and employ less experienced teachers because they were cheaper.

Roger Kirk: "The disadvantaged are suffering"

A member of the union's executive committee, Roger Kirk, said special schools in the London borough of Newham were retaining £1,750 per pupil in their reserves.

"Some of the most disadvantaged children are suffering," he told delegates. "£545m is being locked up and not being spent on children."

And a teacher from Oxfordshire, Robert Williams, said he had been unemployed for nearly 18 months because many schools wanted to employ newly qualified - and less expensive - teachers.

"It's education, education, education - on the cheap," he said to applause.

Others in debt

Other examples quoted by NASUWT officials include a school in South Wales which made three teachers redundant while holding back £180,000 in its contingency fund, a secondary school in London holding on to more than £800,000, and a primary school in the West Midlands retaining more than a quarter of its budget.

Delegates were also critical of the system which awards government funding to different areas of England, arguing that this had led to schools in "favoured" areas building up large reserves while others were in debt.

Nigel de Gruchy: "It's nuts"

The NASUWT's General Secretary, Nigel de Gruchy, called for schools which held excessive amounts of money in reserve to be penalised by the government. "It's the squirrel mentality - and it's nuts," he told journalists, following the debate.

He added that the funding system also encouraged corruption, claiming that many heads were awarding themselves discretionary pay rises while refusing to do the same for the teachers in their school.

The conference gave unanimous backing to a motion expressing alarm at the government's decision to extend an "unsatisfactory and failed method of funding".

It called for an independent review of the system, calling on the government to accept the findings of any such review.