A new system of performance-related pay in schools risks fuelling a rise in fraud as teachers attempt to falsify pupils' results to win salary rises. Teachers could be tempted to "over-egg" children's work to prove they are doing a good job and the proposals could also lead to major employment disputes within schools if teachers who fail to receive higher pay lodge official discrimination claims.

The government urges that exam papers should be scanned by specialist computer software as part of a crackdown on internet plagiarism by A-level and GSCE pupils in their compulsory coursework. The Qualifications and Curriculum Authority warns that exam boards appear to be failing to spot cheating, even though the number of cases of fraud is increasing. Last year 3,600 teenagers were caught breaching the rules, a 9 % rise on the previous year.

Exam boards report a sharp rise in teenagers caught cheating in public exams. More than 2,500 lost marks for breaking the rules in last year's GCSEs and A-levels - a 9% increase on 2003. More than 900 pupils were caught cheating or plagiarising their coursework. In total, 1,013 penalties were triggered by inappropriate use of mobile phones - 16% up on the same time last year.