The financial stability of schools depends on controlling increases in teachers' pay, the education secretary has warned.

Giving evidence to the School Teachers Review Body, Charles Clarke said that teachers' salaries had increased by 13 per cent since 1997.

In his earlier written submission to the board, he argued that settlements must cover a number of years and must be linked to inflation.

In addition, agreements should be announced in November, and not January, to allow more time to plans budgets to be planned.

Clarke is also in favour of giving headteachers and governors more control over performance-related pay.

"Teachers are central to raising standards but were undervalued for far too long," said the education secretary.

"We are proud of the investment we have made in teaching and teachers. We are now seeing the benefits of this investment.

"There are almost 25,000 more teachers in schools than in 1997. We have more teachers than at any time since the early 1980s.

"We are getting more and better teachers into classrooms. A record 24,500 graduates have accepted teacher training places for this autumn.

"That's over 3,000 more than this time last year whilst in 1996 fewer than 18,000 graduates accepted places on teacher training courses."

The education secretary said attractive pay deals linked to inflation were essential to recruit and retain high quality staff.

"Ofsted recently told us that our teachers are the best we have ever had - a cause for celebration," said Clarke.

"We firmly believe that teachers' pay should keep its value.

"To ensure stability for schools the settlement should be at the rate of inflation."