Tony Blair will be forced to start the retreat over school reform next week when a committee of MPs tells him to dilute plans for new trust schools and give town halls even more control over education.

A draft report from the cross-party Commons Education Committee, widely seen as the basis of a compromise deal with mutinous Labour MPs, has been obtained by The Times.

It concludes that local authorities, far from being stripped of control over new self-governing trusts, should be given new powers to force all schools to take their fair share of poor and disadvantaged pupils.

The sweeping concessions suggested by the MPs, in effect tearing up Mr Blair’s school reforms, greatly reduce his room to manoeuvre. If he fails to take their recommendations into a Bill next month, he faces a huge rebellion and will have to rely on Tory support to get the Bill through. If he does amend his plans, the Conservatives will accuse him of backing away from radical reform yet again to placate his own party.

The alternative plan emerged as Lord Kinnock, the former Labour leader, broke his promise of loyalty to his successors by criticising the reforms in a speech to Labour MPs last night.

Lord Kinnock told the BBC he had spoken out with "great reluctance" against his "dear friend" Mr Blair.

"The day was reached - which I hoped would never come - when there was an issue of such profound and lasting significance that would affect not just our generation but others, on which it was important to make my opposition known," he said.

"Politics without compromise is like a car without a gear box: it can look quite elegant but you won’t get anything out of it."

More than 90 MPs, including many loyal former ministers, have made clear that they will vote against the Bill unless it is radically different from the proposals set out in a White Paper last autumn.

This morning, Ruth Kelly, the Education Secretary, played down Lord Kinnock's opposition. "I can tell you that the tone and language Neil Kinnock is using is not the kind of issues being raised by my colleagues," she told GMTV.

Later she told BBC Radio 4’s Today programme that the differences with Labour backbenchers had been narrowed to a "couple of issues".

"What they are saying to me... is that they support the vast majority of the White Paper and that they need clarification and reassurance on a couple of particular issues such as selection and the role of local authorities," she said.

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