Head teachers will be free to shape schools in response to parental wishes, subject only to rules on fair admissions. New providers will vie for parental support to take over under-performing schools.

Successful heads will be free to extend their influence to other schools. Companies, charities and fee-paying schools will be encouraged to create “brand” identities that give purpose and pride to groups of comprehensives, particularly in inner-city areas. The package promises to be the most “new Labour” of Tony Blair’s education reforms with its aim of using consumer pressure to reshape public sector provision.

But the proposal to establish local education markets threatens a showdown with many Labour MPs, who will see it as further evidence of Mr Blair’s desire to open public services to private providers. Labour councils will also be hostile to the move to break up their education empires and relegate them to an advisory role.

School organisation committees, set up by Labour in its first term as part of moves to abolish grant-maintained status, will go. They are seen as obstacles because heads who wish to expand come under pressure from their council and other schools.

The proposal to allow schools to design their own curriculum, subject to DfES approval, will be seen as particularly radical given the hostility that Ms Kelly attracted for her rejection in February of reforms set out by Sir Mike Tomlinson, the former head of Ofsted, to replace GCSEs and A levels with a diploma.

New school providers will be able to negotiate their own pay and conditions agreements with teachers, in the same way as city academies, to encourage innovation.

Teachers’ unions will be fearful that this marks the end of national salary scales. However, their experience in academies so far has been one of improved conditions.

The White Paper will confirm the creation of 200 academies by 2010 and ministers are confident that the goal will be achieved quite comfortably.

The reforms have been driven by a Prime Minister who is desperate to stamp his legacy on education and health before he stands down. Last week he told his monthly press conference: “By the end of the third term I want every school that wants to be, to be able to be an independent non-fee paying state school with the freedom to innovate and develop in the way it wants and the way the parents at the school want, subject to certain common standards, and the White Paper will be the route map to make this happen.”

Mr Blair highlighted the example of Haberdashers’ Aske’s Hatcham College, a successful inner-city school in South London where 86 per cent of pupils gained five good GCSEs last year. He said it had raised standards without altering its intake of pupils. “The whole purpose of our reform programme is to give the kids in the poorer more disadvantaged areas the chance of a really good school,” he said.

The school has formed a federation with a second academy, the Haberdashers’ Aske’s Knights Academy, that has opened on the site of the Malory School in Bromley, where only 15 per cent of pupils passed five good GCSEs.

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