Soaring costs are forcing schools to spend more money on entering children for examinations than on buying textbooks.

Schools and colleges are spending more than £700 million a year on exams, a government commissioned report has found. This includes more than £400 million in fees to exam boards and at least £300 million on invigilators and other staff.

The research suggests that the introduction of the new diploma qualifications for 14 to 19-year-olds could push exam fees even higher in future.

Head teachers are warning that the “bloated” system needs to be cut back severely so that resources can go towards teaching, as opposed to assessment.

John Dunford, general secretary of the Association of School and College Leaders, said the current system of exam fees represented a “desperately bad use of public money”.

He said: “It has become the second biggest item after staffing in most secondary school and college budgets. This bloated external examination system is in need of severe pruning.”

Dr Dunford added that exam results were used for too many different purposes and called for teacher assessment to replace some external tests.

His comments come after a study for the Qualifications and Curriculum Authority (QCA) suggested that the exam system in England, Wales and Northern Ireland was inefficient and showed no signs of improvement.

“Unless action is taken, the burden on taxpayers will increase,” the report by Europe Economics said.

While exam fees have risen, textbooks are now so scarce in many state secondary schools that teachers give them out during the lesson and collect them again at the end, depriving pupils of the opportunity to study them at home.

One head teacher told researchers that exam fee costs had risen over five years from £30,000 per annum to £100,000 for the same number of pupils, although it was not specified whether students were taking more exams than in the past.

The research suggests that exam costs might rise even higher in future. As GCSE coursework is cut back to minimise opportunities for cheating, teenagers will have to take more external exams to make up their marks.

Reform to A levels, which would reduce the number of modules taken by teenagers from six to four, might have been expected to significantly reduce A-level fees overall.

But the study found that A-level fees will drop by an average of just 6 per cent. Exam boards have put up their price per module by an average of 24 per cent.

A separate study for the QCA indicates that the introduction of the diploma qualification could push exam fees even higher.

Ministers believe that diplomas could eventually replace A levels and GCSEs as the qualification of choice for teenagers.

But the study, by the consultancy PKF, says that uncertainty about the take-up levels for the qualification represents a significant financial risk for exam boards, which could be passed on to schools and colleges in the form of higher fees.The boards need to make “a large amount of capital investment” to develop the diplomas, which will be studied by 40,000 teenagers in England from September.

“Not only is the cost of investment in the diplomas uncertain, but there is also uncertainty about what the level of demand will be,” the report states.

“If there is low demand for the diplomas, the awarding bodies risk not recovering their initial cost of investment,” it adds.

A rise in examiners’ and markers’ fees, as well as higher salaries at exam boards, are key reasons for increased exam costs, the research notes.

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