Staff in their early careers, and paid on the main scale, will receive an annual report on their performance from their headteacher before they receive annual increments from September 2005. Rises of up to pound;2,049 could be at stake. Teachers with good reports could jump a pay point and earn up to pound;3,865 extra. Poor reports would mean pay freezes.

The School Teachers’ Review Body also made the controversial proposal of allowing schools in recruitment blackspots to pay staff at London rates.

This would mean that the salary for a teacher with four years’ experience outside London could rise from pound;22,734 to pound;26,226 from September 2006.

The report was published a day before Chancellor Gordon Brown announced that the rise in education spending enjoyed since 1999 will slow after 2006. Education spending will rise by 4.4 per cent above inflation between 2006-08, compared to a recent average increase of 6 per cent. The unions gave a cautious welcome.

The review body report on pay in England and Wales follows a Government submission that teachers on the main scale should make clear progress every year. “Barely satisfactory” teachers should not receive annual increments.

Classroom teacher unions have condemned the move, but headteachers claim it will make no practical difference. Heads have had the power to deny and recommend extra main scale increments for at least four years. But the review body said that in many schools progression up the main scale was seen as automatic.

It said such a smooth progression needed to be “linked explicitly to the realisation that progress depends on performance”.

Doug McAvoy, National Union of Teachers’ general secretary, said the plan would demoralise and demotivate teachers. Eamonn O’Kane, National Association of Schoolmasters Union of Women Teachers’ general secretary, said they would be “rightly angered”. But John Dunford, the Secondary Heads’ Association general secretary, predicted things would remain “pretty much as they are”.

The Government is keen for a labour market more sensitive to local needs and wants a new pay structure from the start of autumn term in 2006. The review body proposes three higher pay bands to replace London weighting.

These could apply to any school with recruitment problems.

The unions, councils and ministers have until September to respond to the proposals. The unions are firmly opposed.

School funding experts say the scheme will work only if the Government increases school budgets to cover higher pay costs. At the moment it will not give any commitment to do so.

A teachers’ pay deal of 2.5 per cent a year, between April 2004 and August 2006, was agreed by ministers in November. This month’s review body report also recommends dropping the external assessment of heads’ decisions on threshold applications and the replacement of the top two points of the upper pay scale with an “excellent teachers” scheme only available to a minority.

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