The Government has been urged to devolve more powers to Oxfordshire schools to help address the school funding crisis.

In a backbench Westminster Hall debate, David Cameron, Conservative MP for Witney, said that despite Oxfordshire County Council passing on all its education budget to schools, they were still suffering a shortfall.

At the same time, Keith Mitchell, Conservative leader of the county council, called for the Audit Commission to investigate the crisis.

Mr Cameron told MPs: "We really need to move to a system where we trust the headteachers more to spend their own money.

"The Department for Education's own figures show that teacher redundancies are up by at least 50 per cent."

The new minister for children, Margaret Hodge, agreed that some schools faced problems because of cost pressures, but insisted that the new funding system was a "substantial" improvement on the one that had existed under the Tories.

The Government had increased funding to schools by £2.7bn and a further £28m had been provided to make sure that schools would get a budget increase of at least 3.2 per cent per pupil.

She said this would protect Oxfordshire pupils.

At a county council meeting, council leader Keith Mitchell told colleagues he had written to the Audit Commission to ask auditors to study the processes by which the Government determined the level of funding for 2003/4.

Mr Mitchell has received a letter from the Commission to say auditors were liaising with the Local Government Association before making a decision on whether to do so.

He said: "We need to keep the pressure up because the funding of schools has been such a shambles this year and we don't want a repeat next year."

Schools across Oxfordshire are being forced to shed staff or cut back spending on buildings because of a shortfall in funds.

Headteachers have blamed rising pension, tax and salary costs for a drop in their overall budgets.

To ease the crisis, Education Secretary Charles Clarke has given schools permission to spend money earmarked for building, in a bid to protect teachers' jobs.