Schools across England face an unexpected budget cut of £155m this year in a move that has provoked fury from councils who fear it will disproportionately hit the poorest parts of the country.

The cut has been made to a fund that pays for pressing needs such as free school meals or extra tuition for children who need help with literacy or numeracy.

The cut was announced in a letter sent 10 days before the end of the financial year and affects money councils have already allocated to schools for next term.

In a letter to Michael Gove, the education secretary, the Conservative chair of the local government association, Lady Eaton, said: "Schools will be very angry at losing funding at such a late stage ... the actual impact will be a reduction in funding for schools and pupils."

She said the impact was likely to be worse for poorer areas as a proportion of the fund related to deprivation, and added: "You cannot cut [budgets] with no warning in March and expect anyone to be able to cope with the consequences."

The 5% reduction in the standards fund, confirmed in a Department for Education (DfE) letter seen by the Guardian, is a small proportion of schools' overall budgets, but is unexpected and will hit schools hard.

Durham county council has identified a £1.8m reduction to its £35.2m standards fund budget for 2011-12 as a result. In Lancashire, the cut amounts to £3.4m and the authority has said it will have to re-issue budgets for all 625 of its schools. An email sent to schools in Devon says: "The [council] has a £1.6m shortfall and is going to have to reclaim this money back from funds already distributed. For many this will turn a balanced budget into a deficit budget, particularly primary schools."

The cut puts more pressure on Gove, who has faced criticism over a string of decisions in less than a year in the job. In particular, his decision to scrap Labour's massive school building programme prompted intense anger from parents and teachers.

The DfE insists the money is not being cut but will go into the general pot for schools for the financial year 2011-12. However, experts say councils will now never see the money.

The fund was allocated to schools by the last government to pay for costs ranging from lunch provision to teachers' professional development, support staff, one-to-one tuition for pupils and information technology. Headteachers have had some freedom over how they use the cash.

Last year, the coalition pledged to abolish the standards fund, but to incorporate it into schools' general funding at the same level received under Labour. Schools were expecting to receive their final allocation of the standards fund for 2010-11 through local authorities this month, under the final budget plans agreed in December 2009 under the last government.

However, on 22 March, Stephen Kingdom, head of the funding policy unit at the DfE, wrote to local authority officials that the standards fund was not being paid in the normal way. Instead, the final tranche was being withheld until the 2011-12 financial year, when it would be subsumed into the overall allocation to schools, which is being held constant in real terms.

Local authority funding experts say this means the cash lost for 2010-11 will never be recouped. The DfE letter says the move may create an "accounting issue" for local authorities and that they can bring funding for 2011-12 forward to support schools if they choose. The £155m withheld is in effect a 0.4% cut in the government's main funding for schools for 2011-12.

A letter to Gove from the County Durham Schools Forum said all headteachers and governors in the authority were "appalled" by the decision and its timing, and budget planning was "in turmoil".

Susie Charles, a Conservative councillor responsible for children's services in Lancashire, wrote to Gove that the move was "regrettable in the extreme", "hasty and ill-considered" and "at odds with indications in December from ministers suggesting the money would be forthcoming".

The DfE said: "Schools will receive the same amount of money as last year and local authorities should be spending the same amount of money on them. We have written to local authorities with advice on the payment arrangement changing."

Gove's gaffes

The debacle over the education maintenance allowance (EMA) continues: first came Gove's U-turn over next year's support of teenagers already in receipt of the EMA. Then came news that funding the U-turn will cost £248m – far more than the £180m he claimed last week. To add insult to injury, Gove also found himself put on the spot by Boris Johnson over his decision to replace the £564m scheme with bursaries for the 16-18s.

In February, a court found Gove had acted in a way that was "so unfair as to amount to an abuse of power" in cutting the Building Schools for the Future (BSF) scheme. The successful challenge by six councils could lead to a rash of similar claims, lawyers say. More than 700 projects were cancelled amid a flurry of repeatedly released, erroneous lists of schools affected by scrapping of BSF programme.

In December, Gove was forced to agree a temporary reprieve for England's schools sports system, which he previously pledged to scrap. His decision to withdraw the £162m annual Department for Education funding brought heavy criticism from headteachers, Olympians and young people. Following the furore, Gove managed to find £112m in new funds to ensure the short-term future of the 450 school sport partnerships (SSPs) across England. Amelia Hill