Education spending in NSW will be slashed by $1.7 billion with independent schools expected to share the pain with the public system.

Premier Barry O'Farrell has described the cuts as "difficult but necessary".

The Education Minister, Adrian Piccoli, said he would cap per capita funding for independent schools at the current level, which will save the government $116 million over four years. Public schools would lose $201 million from their budgets.

"It will not be capped forever and the cap won't come into effect until the first of July 2013," Mr Piccoli said.