Reports on how the DfES school funding system is failing to redress the school shortage in regeneration areas. Local educational spending uses a formula based on current and projected population size. This can undermine the entire regeneration strategy in areas of planned population growth and housing market renewal. DfES revenue funding is decided on the number of children taught rather than the number of school places. The penalty for over-estimating growth is greater than that for under-estimating it. Looks at the alternatives to mainstream DfES funding of new schools: PFI agreements with private companies; s106 planning agreements with developers' contributions; city academies sponsored by private donors; and the DfES's own little known exceptional need mechanism. Provides case studies of the exceptional need mechanism in Milton Keynes and the city academy approach in East Manchester.