Schools face “budgeting challenges”, Number 10 has admitted, amid a cabinet row over when to give them extra billions of pounds.

Theresa May wants to inject up to £9 billion per year over three years into education, totalling £27 billion, including plans to build new schools and pay teachers higher wages.

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A Downing Street source said: “It is a fact though that school funding in England is at its highest ever level - rising from almost £41 billion in 2017-18 to £43.5 billion by 2019-20.

“But while there’s more money going into our schools than ever before, we know they face budgeting challenges.”

Extra funding for schools

The admission is a marked change from the government’s previous simple assertion of record school funding when countering claims about damaging budget cuts.

It is more evidence of a major shift in the climate around school funding as contenders in the race to succeed Ms May compete on offering education more cash.

However, there are internal cabinet tensions about when extra money should go into education. Last night it was reported that chancellor Philip Hammond was prepared to resign over Ms May’s plans to spend the billions to shore up her legacy.

Senior government sources told the Press Association that tensions between Treasury and Number 10 officials had reached boiling point over the outgoing prime minister’s spending intentions.

Mr Hammond is understood to be so against the plans that he is prepared to quit the government in what would be an extraordinary move just weeks before the PM leaves office.

The chancellor is thought to be particularly angry that the plans could tie the hands of her successor, which one source said was “immoral” and “irresponsible”.

“Everyone knows this government is coming to an end and ministers are desperately trying to shore up their legacy by splashing the cash,” they told the Press Association.

“Not only is it immoral to take away the choices of the next PM, it’s irresponsible - especially as no-deal looms.

“There are times it’s reached boiling point with the chancellor prepared to just walk away.

“No one’s denying that there are some spending pressures but these are decisions to be taken by a successor in the round - not wasted on frivolous vanity projects or an attempt to bind the hands of the next person by making three-year pledges on their behalf.”

A source close to the chancellor added: “The chancellor is 100 per cent dedicated to getting on with the day job - promoting economic stability and ensuring prudent public finances.

“He has overseen great success with rising employment and wages, and wants to see this continue.”

Number 10 is understood to be asking Mr Hammond to free up money from the £26.6 billion “war chest” he set aside in case of a no-deal Brexit to fund the plans.

In the Spring Statement in March Mr Hammond said he would decide in the Spending Review how to share the proceeds from any Brexit “deal dividend” - if an agreement passed the House of Commons.

Ms May’s tenure in Number 10 will end next month, and she has already sought to define her legacy with pledges to tackle climate change, mental health and modern slavery.

On Monday she set out plans for new teachers to receive training on how to spot the signs of mental health problems in youngsters, under a plan to overhaul society’s approach to the issue.