School budgets are set for a squeeze to pay for Labour's 3.5 per cent teacher pay rise, despite earlier impressions that it would be fully funded, union bosses say.

Lucy Powell, the Education Secretary, is facing a fight from the NASUWT teaching union, which said the pay rise remains 'underfunded' and will result in classroom cutbacks.

The row comes after Mrs Powell wrote to another teaching union, the NEU, to avert its strike plans by saying pensions savings could be used to fund the pay rise.

The £500 million raised from reevaluating support staff's pensions would not be 'clawed back' and would mean schools could afford the rise, she said.

'We are confident that schools will be able to cover the costs of the teacher pay award, at a national level,' she said in a letter.

At the time, the NEU's General Secretary Daniel Kebede claimed victory, saying it meant the pay award would be 'fully funded'.

However, the NASUWT has now said this impression was not correct and £500 million still needs to be found.

This is because the pensions savings cited by Mrs Powell were announced many months ago, and have already been factored into school budgets to be used for other things, the union said.

Ultimately, if more money is not found, it could still result in staff cuts, the union fears.

Matt Wrack, NASUWT General Secretary said: 'A pay rise that isn't fully funded simply leads to cuts in school budgets and is yet another attack on children's education.

'Despite all the spin, there is no new money for schools and the underfunding crisis remains.

'We don't believe the Government can try and spin its way out of a gap in funding.

'Our members deserve honesty from the Department for Education because at the moment there is concern and confusion in schools with mixed messages coming from ministers.

'If Lucy Powell believes schools can fund this pay award from existing budgets she needs to explain to the profession which services she expects schools to cut.'

Mr Wrack wrote a letter to Mrs Powell last week saying employers 'have been aware of the new rates for some time and have already built this into financial planning'.

The 3.5 per cent pay rise for this year was originally going to be part-funded by the Treasury, with 1 per cent to be found from school budgets.

However, the NEU threatened nationwide strikes unless the Government agreed to fund the rest of it.

Mrs Powell's announcement on the pension savings, last month, was interpreted at the time as an end to this funding crisis.

Today, shadow education secretary Laura Trott said on X of the latest row: 'When other parties hailed this smoke and mirrors pay rise as a victory for teachers, we didn't.

'It is not new money for schools. It doesn't reflect the reality schools are facing. We said from the start that this deal was not good enough.'

However, a Government source denied there was spin and stressed it had been 'factual and clear' that there was no new money.

A DfE spokesman said: 'The pay award remains the same. What has changed is the affordability position following the recent valuation of the Local Government Pension Scheme, which has reduced schools' costs and strengthened schools' ability to meet the costs of the award.

'This represents a substantial improvement in schools' financial position for this year - helping them meet the costs of teacher pay.'

They added: 'Supporting the whole school workforce remains a priority for this Government, and the recent pay awards and funding will benefit teachers, teaching assistants and support staff alike.

'The recent Local Government Pension Scheme valuation reduces what schools have to pay into the scheme as employers, but it does not reduce the pension benefits support staff receive. This has the overall effect of supporting the whole school budget.'