The Government must pour more money into Bradford's schools to lift them from the bottom of the table, according to a national watchdog.

Education monitor Ofsted today said schools in the district were "satisfactory" but it warned further improvements would only be made by pouring in extra cash through the private contracter running the district's schools.

Although the report states that there have been improvements since Ofsted's last inspection in 2003, it still concludes that "standards of attainment are too low".

Education across the district was condemned as a failure in 2000 by the education watchdog, and the local education authority was taken over by a private company in 2001.

Serco, which trades as Education Bradford and is commissioned by Bradford Council, took on the job of driving up standards in a £360 million ten-year contract.

But Ofsted believes neither Serco nor the Council can afford to pump in the extra resources needed to raise standards. And it recommends that the Council's contract with Education Bradford be dramatically re-drawn.

Inspectors reported in the 50-page document that: "The level of support required for the future cannot be provided . . . with the funding available under the present contract. Capacity for further improvement is therefore unsatisfactory."

Senior staff at the Council and Education Bradford are now expected to approach the Department for Education and Skills to ask for the money.

Education chiefs have until June to produce an action plan spelling out how they intend to address the funding issue and other Ofsted criticisms.

Phil Green, the authority's director of education, said: "We will need to look at the capacity of the contract and look at reviewing funding of the contract with the DfES so we can make sure there is sufficient funding due in the future."

But he added: "The precise level of the additional investment is something we have got to do more work on."

Mark Pattison, managing director of Education Bradford, who last week announced his resignation, agreed but added: "I am confident we will make that work whether it leads to more money or not."

Around £3 million over and above the initial contract's requirements have so far been poured into schools services since Education Bradford took over but more is needed than was ever budgeted for.

Both Mr Green and Mr Pattison deny the original contract was a mistake but admitted it failed to take into account the large number of schools which sank into special measures during the hand-over period when Ofsted suspended its inspections.

At one time there were 30 schools in special measures and with serious weaknesses, though that has now been cut to 11.

Bradford Council says the authority has historically been under-funded by £11.8 million a year though the Government has provided around £5 million of that in its most recent settlement. Education chiefs are now hoping the extra cash will be made available, though they accept it may not all come at once.

The Ofsted report praises Bradford Council, Education Bradford, the Education Policy Partnership and the schools themselves for improvements in overall performance.

A spokesman for the DfES said: "We and the Council are now commissioning an independent review which will look at how their contract can be enhanced to provide capacity to address schools' future support needs.

"There will be consultation with Education Bradford, the Education Policy Partnership, the School Improvement Project Board, schools and the Children and Young People's Strategic Partnership as the review proceeds, and we expect to consider its conclusions with these partners during the summer."

Ofsted says the district's education system has improved to "satisfactory" levels. Its 2002 inspection found the LEA to be "unsatisfactory" the 2000 inspection report found the LEA to be "very poor".

It also says that out of 50 Ofsted categories, Bradford LEA was judged to be "highly satisfactory" or "good" in 18, "satisfactory" in 23 and "unsatisfactory" in nine.