Private companies should be allowed to run state schools at a profit and be free to dismiss teachers who are not up to the job, the head of the Local Government Association (LGA) said yesterday.

They should also be able to “sweat” the most from their assets by hiring out their buildings and grounds in the holidays, Sir Simon Milton said.

In remarks that brought condemnation from teachers’ unions, Sir Simon said that the role of councils should be to buy education services on the open market from a variety of providers, including for-profit private concerns.

“I have no difficulty with that idea,” he said. “My view, and the LGA’s view, is that councils are not meant to run schools any more.”

Sir Simon, a senior Tory and former leader of Westminster City Council who advises the Mayor of London on planning and housing policy, said that the role of councils was merely to commission public services such as schools and then to maintain and improve standards by tracking performance closely. He envisaged a mix of privately run institutions, academies and schools run by parents or voluntary organisations, all within the state education sector.

“The future is to have different types of school to ensure there is real parental choice,” he told The Times.

His suggestion would set a precedent for privatisation in education. In the mainstream schools sector, and even in the academies programme, sponsors are not allowed to make a profit, and existing governance structures ensure that some community representation remains on governing boards.

Where outside organisations already run state schools, such as the Learning Trust in the London Borough of Hackney, they are set up as charities or trusts.

Sir Simon’s comments may put pressure on David Cameron, the Tory leader, to pursue even more rigorously his plans to make it easier for parents and other interested parties to set up and run their own state-funded schools.

Michael Gove, the Tory schools spokesman, agreed with Sir Simon that commercial companies should be allowed to run schools, adding that he had been courting potential bidders. “We have talked to a couple of private companies as well as philanthropic organisations. One company felt that being able to provide state education in England would be such a feather in their cap that they would be delighted to take up the opportunity,” he said.

However, he did not believe that companies should be able to make a profit from running state schools. Instead, they would plough all funding to the school. “The money we spend on education should stay within education,” he said.

Both Sir Simon and Mr Gove said that they would not allow such schools to operate on the basis of academic selection.

Sir Simon said that the national pay scales for teachers should be scrapped so that outstanding staff could be rewarded with higher pay than less able colleagues. Head teachers should also be paid the market rate to attract the best. “There may be heads for whom £200,000 is the right level,” he said.

Schools should also be supported by councils to sack teachers who were not up to scratch. “If you are a head going into a school to do a turnaround, you can very quickly realise that there are a handful of teachers who are not only not performing, but who are also, frankly, dragging down the whole staff-room,” he said. “It can take two years to remove a teacher on the grounds of poor performance and that’s just far too long.”

Sir Simon said all schools should do more to squeeze money out of their assets. “We have very expensive community assets called schools, sitting at the end of the road, which are closed in the summer. We need to incentivise schools and governing bodies to make their facilities more widely available.”

Chris Keates, general secretary of the teachers’ union NASUWT, said: “Sir Simon’s comments suggested that the sector would face massive upheaval under a Tory government. State education is about social justice and protecting the weak, vulnerable and disadvantaged. If you make all that subject to profits, you will be throwing the public service ethos out of the window.”

John Bangs, of the National Union of Teachers, feared that standards would drop if private companies ran schools at a profit because they would stick rigidly to their contracts with local councils, bringing no extra added value. “All the added value and extra commitment you currently get with staff in the public sector would be erased,” he said.

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