Headteachers are refusing to accept their budgets in anger at an education funding crisis.

In an unprecedented move, all 40 headteachers at Brighton and Hove's state-funded schools told the city council at a meeting yesterday they are handing back the budgets given to them.

Brighton and Hove received one of the worst government settlements in the country last December, which means schools are facing big holes in their spending.

Increases in National Insurance and other staffing costs mean many schools will be facing deficits running into hundreds of thousands of pounds.

Heads are saying budgets are so severe, that in some cases, teachers and staff will have to go.

Peter Evans, headteacher at Cardinal Newman school in Hove, has written a letter on behalf of all the heads to Chancellor Gordon Brown in the hope something can be done to ease the funding squeeze before the Budget next week.

He said: "Each school has recognised that the financial position we find ourselves in is intolerable.

"We believe the very fabric of what we stand for has been cut away from us.

"That collective view is so strong that for the first time ever there is a mandate from the schools to refuse their budgets."

Heads are now asking their governing bodies to hand their budgets back to the council, which would then have to take direct responsibility for administering them.

Mr Evans said: "Unfortunately there needs to be an immediate response.

"It really sets out to undermine the children of our country. Parents trust us to do our best but the wherewithal to do this has been taken away from us.

"I have never come across a budget situation like the one we are facing."

Brighton and Hove was hit by government plans to shift money from the South to the Midlands and North.

Last year, it was given £183.3 million, which was an increase of 3.5 per cent. The national average was a six per cent increase.

Councillor Jenny Barnard-Langston, who is chair of governors at Somerhill School in Hove and a governor at Blatchington Mill, said: "The city council failed to get enough money from the Government which means budgets don't add up.

"I have never known it to happen that 100 per cent of headteachers are recommending to their governing bodies not to accept the budgets."

David Hawker, children, families and schools director at the council, said: "We will now be writing to all school governors to explain the issues and the process they would need to go through should they wish us to directly run the school budgets."

Elsewhere in the county, education chief at West Sussex County Council Robert Back is encouraging parents to write to the Government expressing concerns about the budget.

He said: "The county received the lowest funding per pupil nationally and has had several government grants withdrawn."