Assembly members are to carry out a review of school funding in Wales in a bid to dispel the “funding fog” surrounding education budgets.

A five-member committee will examine income streams; the distribution of funding to schools; and the impact of Assembly and Westminster government initiatives. It must report by next June on how the funding system can be simplified.

But as TES Cymru went to press, it was unclear whether the defeated minority Labour government would nominate members to the committee, agreed this week by opposition AMs.

Heads and teacher unions have long complained about how schools are funded in Wales. All parties, including local education authorities, complain of under-funding.

Plaid Cymru’s Janet Ryder, shadow education minister, told the Assembly:

“Teachers and heads in Wales, even the Welsh Local Government Association (WLGA), warn of budget deficits. If those professionals can’t find the money, how can the government ensure its policies are adequately funded and implemented?

“It’s no surprise the present confusing situation is causing mounting frustration.”

But Jane Davidson, education and lifelong learning minister, said the government had made the funding system more transparent, and that the Assembly’s education committee should carry out any review. “Alternative arrangements will not be effective in influencing the government.”

The Assembly government is committed to funding schools via local authorities. But as most of the cash allocated for education is not earmarked, councils can spend it how they see fit - including on other services.

Most spend the same or more on education as that recommended by the Assembly government. But how much is passed direct to schools varies significantly.

Peter Black, Liberal Democrats chair of the education committee, said the school funding committee had not been set up to insist LEAs pass on certain amounts of cash to schools.

But the WLGA is already gearing up to defend its control of education spending. In a consultation paper, it says the current funding arrangements for schools have stood the test of time.

“All objective measures prove beyond doubt that the current arrangement is delivering results and the best opportunities for young people,” it claims.

Advantages include local accountability for decisions through the ballot box, and the extra funding for schools (pound;20 million in 2004-5) provided by local authorities above the Assembly’s allocations.

It faces challenges from the Secondary Heads Association Cymru and the National Union of Teachers Cymru, which are both in favour of core funding for the curriculum going direct to schools.

Brian Rowlands, SHA Cymru secretary, welcomed the review, saying: “There is more money for education, but it is not getting through to school budgets, leading to frustration and anger.”

In a report published today, NUT Cymru recommends a partnership between local and national government, with councils responsible for school buildings, special needs and transport - but with earmarked “teaching and learning grants” going directly to schools for the purpose of teaching the curriculum.