School closures will be the price to pay for a £200 million windfall for Scottish education, ministers said last night.

About £115 million will be released over the next five years specifically to upgrade Scotland's crumbling classrooms.

Local authorities will be able to put bids in, however, New Labour has made it quite clear that under attended schools ought to be dropped. This will harm services in rural communities typical of much of Scotland.

Donald Dewar, the Scottish Secretary, gave a clear signal that they would be expected to bite the bullet and address the problem of half-empty schools.

Speaking at Westminster after the Budget, he said: "I think we all recognise that there is going to be a rationalisation in the school service, almost inevitably, with the changing profile of the population - movements in the population - and that is something we would expect local authorities to want to tackle. But it's easier to tackle if at the same time you can offer some help."

Education was central to Labour's election campaign, and in his speech, Mr Brown appeared determined to demonstrate his commitment by coming up with new money. In total, he allocated an extra £2.3 billion to British schools over the next five years.