The big question over teachers' pay was never, “can the Government afford to pay teachers more?” but rather, “can it afford not to?”.

This year sees a raft of reforms to the education system. They include reform of the A level, implementation of changes to the Key Stage Three Curriculum for 11 to 14-year-olds, and the introduction of personalised learning and single-level testing.

Most important of all, 2008 sees the introduction of the new diploma courses and qualifications for 14 to 19-year-olds, described by ministers as the most significant change in education in 40 years.

It was unthinkable, therefore, that Ed Balls, the Schools Secretary, would chose this year to pick a fight with the teaching unions. And the three-year pay award of 2.45 per cent from September this year (with more for some London teachers) and 2.3 per cent a year from 2009 and 2010, has been pitched with this in mind.

Will it be enough to stem unquiet in the ranks of teaching unions? Probably.

Unions made perfectly clear at their annual conferences that they would not be happy with a below-inflation increase, which would effectively represent a pay cut. Today's offer is ahead of the consumer price index, currently running at 2.1 per cent. But it is behind the retail price index, the figure preferred by the unions because it includes costs such as rents and mortgages, which is running at 4 per cent.

The National Union of Teachers (NUT), Britain's largest teachers' organisation, said today that it was unhappy about the award, adding that it was considering balloting members on industrial action at a meeting of its executive next week.

Chris Keates, of the NASUWT, said her union was not “at this stage” talking about industrial action, however. Compared with other public sector workers, teachers had fared relatively well this year, she said.

This is true. Police and prison offers, for example, are facing a 2.5 per cent offer for the current year, but the staged introduction of these awards has reduced their value to 1.9 per cent. Nurses are also being restricted to 1.9 per cent

Ms Keates said that her union would now poll members to gauge their response to the award.

Other unions were more conciliatory. John Dunford, General Secretary of the Association of School and College Leaders, welcomed the offer.

“There had been a good deal of anxiety among school leaders at the prospect of a lower award, which would have made recruitment and retention of teachers even more difficult, especially towards the end of the three year period,” he said.

Mick Brookes of the National Association of Head Teachers agreed: “School leaders will be able to plan budgets with reasonable certainty,” he said.

Mary Bousted, General Secretary of the Association of Teachers and Lecturers, said that the award was “better than expected”. “We are pleased the School Teachers' Review Body (STRB) held a firm and principled position by not capitulating to the Government's demands to keep public sector pay to 2 per cent,” she said.

The decision by the Schools Secretary to accept the review body's recommendations in full is indeed crucial to the unions' moderately positive reactions. So too is his decision to give a new remit to the STRB to monitor teachers' pay levels in light of recruitment and retention trends and wider economic and labour market conditions.

At present there is little sign that pay levels are affecting either recruitment or retention seriously. Between 1997 and 2007, teachers' average pay increased by 48 per cent in cash terms and 19 per cent taking inflation into account. Average pay is now £34,000, with starting salaries of £20,000 in England and Wales, rising to 24,000 in inner London.

Workforce reforms have also reduced teachers' working hours and a new survey from the business consultancy GoodCorporation suggests that state schools are considered the fairest places to work by their employees.

Even if the pay award does avert the threat of strike action, this is not the end of the story. Schools have been promised a minimum funding increase of 2.1 per cent over the next three years. For those schools getting more than the minimum, meeting the pay award is unlikely to be a big problem, but for those stuck on the minimum, implementation could be painful and will require cutbacks or savings.

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