text: Lib Dem sources say 30,000 local authority places are being lost as money is diverted to new free schools.
  They said Mr Gove was "ideologically obsessed" about backing free schools.
  Tory education sources called the Lib Dems "pathetic", saying more school places were being created overall.
  Asked about the issue on BBC One's Andrew Marr Show, David Cameron said free schools were "an excellent innovation" and he would "get on with delivering what matters, which is good schools for our children".
  The Liberal Democrats' deputy leader, Malcolm Bruce, said the budget for free schools was "completely out of control" and accused the education secretary of being "monetarily obsessed".
  He told the BBC: "He [Mr Gove] is basically raiding money that should be going to the vast majority of schools that have real needs for a small number of free schools, many of which are in places where there isn't a pressure or a need."
  Mr Bruce added: "Michael Gove needs to be reined back, the programme needs to be properly costed and controlled."
  The row is not the first within the coalition government over education policy.
  But BBC political correspondent Iain Watson said the "striking" language used was evidence that both parts of the coalition were becoming more willing to air their disagreements and grievances in public a year ahead of the general election and less than two weeks before local and European elections.
  According to sources in Mr Clegg's office, last December Mr Gove overruled the Lib Dem schools minister David Laws to take £400m from the Basic Need Budget for 2015-17.
  They claim the money was diverted to help cover a projected £800m overspend between 2013 and 2016 in the budget of free schools - a project close to Mr Gove's heart.
  By Alex ForsythBBC Political Correspondent
  With less than two weeks to go before the local and European elections, increasing tensions between political parties are no surprise. The coalition parties in particular are trying to put clear water between them, and this isn't their first public disagreement.
  But on this occasion both sides have bandied round strong language - calling the other 'pathetic' or 'laughable' and describing funding decisions as 'lunacy'.
  Those involved may see it as an opportunity to promote their party's policy and convince voters of what they stand for - in the strongest possible terms.
  To others it might be viewed as two political parties, both in government, attacking each other and policies they've officially both agreed. They may view this as good tactics. The public may view it differently.
  Free schools can be set up by parents, teachers, charities, businesses, universities, trusts, religious or voluntary groups, but are funded directly by central government. There are currently 174 free schools in England with another 116 approved to open from this September.
  A Lib Dem source said the Conservatives were "putting the needs of a handful of their pet projects ahead of the requirements of the other 24,000 schools in the country".
  "Michael Gove was warned by the schools minister David Laws that this was a bad idea but the zealot pressed on anyway," said the source.
  Mr Gove's allies say the Basic Need Budget will still rise by more than £200m a year in 2015-17 and argue that expansion of free schools will lead to more school places overall.
  Research last month highlighted by the Labour Party suggested the government was currently funding free schools for 1,500 more pupils than were actually attending.
  A spokesman for Mr Gove disputed the claim by critics of free schools that the places being created were not necessarily where they were most needed.
  He said: "The suggestion we are cutting money for new places in areas of need to pay for free schools where they are not needed is totally wrong.
  "These claims pretend that money spent in free schools is not creating new places in areas of need. That is simply not true."
  Research by the Times Educational Supplement suggests that:
  The row comes days after emails leaked to the BBC indicated senior Department for Education officials had raised concerns school places may have to be cut if the Lib Dems' free school meals policy for infant children was implemented.
  A Conservative source at the Department for Education said: "This is a pathetic attempt by the Lib Dems to divert attention from their botched school food policy which councils are being forced to fund by cutting money for school places.
  "They opted for free schools and backed them from the start. For the Lib Dems to attack them now is frankly risible."
  Labour's shadow education secretary, Tristram Hunt, said free schools "had the Lib Dem stamp of approval from day one.
  "They're as much to blame for the failings as the Tories."
  Mr Hunt said there was a "national crisis" over primary school places and said the secretary of state was behaving irresponsibly.
  The Lib Dems and Tories have also previously clashed over the employment of classroom staff without formal teaching qualifications and Mr Gove's decision not to re-appoint Labour peer Sally Morgan to watchdog Ofsted.
  Two days ago, a report by a cross-party group of MPs said financial management of some free schools was inadequate.
  The Public Accounts Committee said procedures were "overly reliant" on whistleblowers to uncover financial problems.
  The government said many of the committee's concerns were "misplaced".
target: A row has broken out in the coalition over school places funding in England, with allies of Lib Dem Deputy PM Nick Clegg accusing Conservative Education Secretary Michael Gove of "lunacy".