In a speech that reveals a shift in Labour policy since the last general election, he said comprehensives under Labour would be encouraged to specialise but not to select pupils.
At the last election, Jack Straw, then the party's education spokesman, said in a policy document: "Research findings suggest that comprehensive education leads to increased standards and opportunities in our schools."
But yesterday Mr Blunkett said: "In spite of more than 50 years of universal state secondary education and 30 years of comprehensive education, the pattern of excellence at the top and chronic under-performance at the bottom persists."
He borrowed the word "diversity" from the Conservatives to describe a comprehensive school system under Labour.
Labour denied that it had done a U-turn. A source said the party was "reiterating support for setting by ability and specialisation within a co-operative framework".
Mr Blunkett blamed both the old left of the Labour Party and the new right for their belief that nothing could be done to raise standards, and he said progressive teachers who refused to divide pupils according to ability were responsible for comprehensives' failure.
Teachers' leaders dismissed the speech as another new Labour ploy to make the party electable and said plans for specialisation amounted to selection by the back door.
In his lecture to the Social Market Foundation, a free-market think-tank, Mr Blunkett committed Labour to comprehensive schooling but said it would have to change. The view that comprehensives were like the worst secondary moderns was too often justified.
But he said the comprehensive system should not be abandoned: selective grammar schools provided a good education for a minority of students while secondary moderns wrote off most of the rest.
Instead, comprehensives should be adapted, he argued. The schools should specialise in particular subjects, set pupils according to ability in different subjects, and co-operate so that pupils at one school could benefit from expert teaching at another - either through information technology or teaching groups organised by several schools. Labour hopes groups of schools will get together and decide on different specialities.
Mr Blunkett added that Britain was not the only country in which the gap between pupils' achievements was wide, but it was unique in accepting that situation as normal.
Under Labour, he said, there would be diversity among comprehensives. "Diversity which enables schools to find and foster the strengths of every single child. Diversity which refuses to accept failure ... which ensures that the goal is to level up, not level down ... which enables local schools to become centres of excellence, playing to their own strengths but acting as a resource to other schools and to the wider community."
Peter Downes, past president of the Secondary Heads Association, said Mr Blunkett was "up a gum tree". He added: "Where schools are genuinely comprehensive there is very strong evidence from exam results to show that lower and middle-ability pupils are doing better than they would have done in secondary modern schools. Where has he got the idea that we are all ideologically bound to mixed-ability teaching? The idea went out years ago."
Nigel de Gruchy, general secretary of the National Association of Schoolmasters Union of Women Teachers, said: "Labour have to come clean and admit that specialisation implies selection.
"Some specialisations will prove more popular than others. The idea that children could take advantage of specialist teaching at other schools is totally impractical."
A spokeswoman for the National Union of Teachers said: "The linking of schools is a sensible use of scarce resources. It extends the opportunities of children and makes sense in such hard-pressed times."
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