SCHOOLS that squirrel away hundreds of thousands of pounds should have the cash confiscated and handed to other headteachers, the Government said yesterday.

Local authorities were urged to get tough on schools which are hoarding money in bank accounts that should be spent on improving education.

Councils already enjoy powers to claw back schools' excessive reserves, but many are failing to use them, the department for education (Dfes) said.

At the same time, it published figures revealing that reserves across England had more than doubled in the past seven years, to £1.6bn.

At least 13 schools in the North-East and North Yorkshire banked sums equivalent to more than a quarter of their annual budgets last year, The Northern Echo can reveal. They include three each in County Durham, Redcar and Cleveland, and North Yorkshire, and two in Gateshead and Hartlepool.

The Dfes considers reserves above only five per cent (secondary schools) and eight per cent (primary schools) to be excessive.

The biggest reserve in the region was held by Fens Primary, in Hartlepool (£352,607), but the largest as a proportion of its budget was at Beech Grove Primary, in Redcar and Cleveland (46.2 per cent). However, last summer Beech Grove amalgamated with Cromwell Road School to become South Bank Primary School.

Schools Minister Jim Knight said yesterday: "Individual schools' surplus balances, which grow year-after-year with no clear purpose, are denying educational benefits to today's pupils.

"Basically, we want schools to spend it. We give them money to invest in education and not to put into the bank. The surplus has been going steadily up over the years."

Separately, the Dfes has launched a consultation on a new system that would automatically cream off five per cent of every school's reserves - bringing in an estimated £75m.

It would be to the local authority to decide how to spend the money it recouped, which could be handed to other schools.

But Councillor Glyn Nightingale, Redcar and Cleveland's cabinet member for education, said many reserves were held for specific projects that schools were planning.

He said the high figures for Beech Grove Primary and Pathways Special were distorted because neither school was open for the full 2005-2006 financial year.

Coun Nightingale added: "We do have a policy of clawing back money from excessive reserves, but we have not needed to use it."

Meanwhile, the crackdown was criticised as "harsh" by the National Association of Head Teachers, which also said reserves were set aside for important projects.

It said the figures were inflated if funds were allocated late in the financial year, making it impossible for the schools to spend it before the cut-off point.

Mick Brookes, the association's general secretary, said: "You could be planning a major new sports hall and suddenly find yourself having to find five per cent more for it."