Set up as a quango by the Conservative Government to fund grant-maintained schools, the agency opened its main base in York in 1994.

Many civil servants, accountants and administrative staff moved to York and North Yorkshire to join the staff and to deal with the increasing workload.

But within three years of its arrival in York, the writing was on the wall for the agency when Labour won its landslide election victory in May 1997.

One of the party's pre-election pledges was to end the system of grant-maintained schools and this spelled the end of the line for the agency.

Today, it lost its grant-making powers and the bulk of the staff left yesterday. The rest of the staff will leave gradually over the next six months until the last of the agency's business is completed and it winds up altogether in October.

At its peak the agency employed 200 staff in York and by the end of its life it was looking after 1,200 schools - catering for 10 per cent of the country's school pupils and dealing with a £2 billion budget.

At the moment the future of the building is unclear and although many of the staff have found new jobs, some are still looking.Careers consultants have been brought in to help staff look for jobs, especially those whose experience is mainly at the agency and in the Civil Service.

Roger Witts, head of communications, said: "Everybody has been realistic about it.

"In opposition David Blunkett had been saying they appreciated the experience and skills of staff of the Funding Agency and said that experience mustn't be lost to the system.

"When it came down to it staff felt let down, but that feeling of abandonment is balanced by the knowledge that an awful lot of things that the agency has pioneered and developed are appearing in the Government's new framework."

The new framework is set to be introduced in the autumn - but in the meantime grant maintained schools will get their money direct from the Department for Education and Employment.

Then a new system will be introduced where all schools will be part of local education authorities to varying degrees.

There will be three categories of schools - foundation schools, which will be the closest thing to the current grant maintained schools, voluntary schools (usually church schools) and community schools.

Mr Witts said all three categories would have less independence than grant maintained schools - but at the same time all three would have more independence than local education authority schools at the moment.

He said: "Over recent years the teaching profession has seen so many questions raised about running schools on the educational and academic side.

"What they're looking for now are some answers. They've not yet been given a framework where they are trusted and can get on with it.

"But now they will get new clearer roles and I think schools are going to welcome that - but for everybody it means another change."

Several ideas developed by the agency were set to be adopted in the new system, he said.

One was its system of giving capital funds - the agency started to ask grant maintained schools to raise a proportion of the cash needed from the lottery or other grant sources or even traditional fundraising.

This would mean that an investment of £50 million by the agency had secured schemes valued at over £193 million.

The agency had also developed a formula based on the number of pupils in a school for other capital grants needed for smaller projects like having windows replaced.

Even its "Rainbow Pack" - a manual about how to run a school - is set to be copied in the new system.

As for the building, York MP Hugh Bayley has been pushing for it to be used in some way after October by the Department for Education and Employment.

Some hope for the staff still looking for jobs might be if the new General Teaching Council being proposed by the Government is based in York.

Mr Bayley said he had put a case for this to Education Ministers but had so far not received any indication one way or another.

In the meantime the agency has not only left a legacy in the development of the way schools are run, but its staff have left their own mark by raising a large amount of money for York District Hospital.

Their efforts led to £12,500 being handed over to York Health Trust yesterday.

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