Parents were also given the green light to set up and run their own schools - with local education authorities facing a veto if they turn applications down. The White Paper - Higher Standards, Better Schools For All - also envisages giving more power to pupils in secondary schools. It encourages the setting up of schools councils - allowing children to take part in interviewing any new staff for the school.
The central thrust of the White Paper - as revealed in Monday's Independent - is to allow all schools to opt out of council control and become independent self-governing state schools.
They would be run by trusts - businesses, faith groups, universities or charities - charged with setting up parents' councils to liaise with over the running of the school. A schools commissioner would be appointed by the Government to ensure every school had a trust partner to work with.
Among those groups already expressing an interest in becoming trust partners are companies such as Microsoft, GEMs - the company running a network of cut-price independent schools in the UK, and the Sutton Trust, set up by the millionaire philanthropist Sir Peter Lampl to widen access to both better performing schools and elite universities to working class neighbourhoods.
In addition, local education authorities would be barred in future from setting up new council-run schools. All new schools would have to be self-governing schools, faith or trust schools or privately-sponsored academies.
The moves, outlined in a Commons statement by Education Secretary Ruth Kelly yesterday, were greeted with loud cheering from Conservative MPs - who saw them as a return to the old grant-maintained system of schooling abolished when Labour swept to power in 1997 - and muted support from the Labour backbenchers, many of whom believe they foreshadow the privatisation of the education service. David Cameron, the Tories' education spokesman and leadership candidate, told the Commons: "When it comes to reform, isn't it the case that the Chancellor won't have it, the Cabinet doesn't like it, the Labour back-benchers won't wear it, the Deputy Prime Minister can't bear it and the teachers' unions and Labour local education authorities will try and stop it?" He said that Ms Kelly needed all the support she could get.
Teachers' leaders poured scorn on the proposals with Dr Mary Bousted, general secretary of the Association of Teachers and Lecturers, saying: "Talk of increasing the supply of education providers is political nonsense. It is a product of policy wonks with little idea of what works."
Ms Kelly insisted the plans were not a return to grant-maintained schools.
"The grant-maintained system was based on getting unfair funding and creating elite schools for a few pupils," she said. Only 18 per cent of secondary schools opted for it.
Tony Blair said: "We are poised to become world class if we have the courage and vision to reform and invest further and put the parent and the pupil at the centre of the system. We must put parents in the driving seat for change in all-ability schools that retain the comprehensive principle of non-selection but operate very differently from the traditional comprehensive."
In addition to allowing all schools - both primary and secondary - to become trust schools run along the lines of the 200 privately-sponsored academies being set up by Labour to replace failing inner city schools, the White Paper will also pave the way for independent schools to "opt in" to the state sector.
This is likely to be taken up by many Muslim schools - previously denied the opportunity because of inadequate school buildings.
Parents will have the opportunity to shape school policy on meals, uniform and discipline through parents' councils to be set up in any school where the trust running it has a majority on the governing body.
They can also trigger an inspection if they are worried about performance - a move which could lead to the sacking of the head teacher and the closure of the school. It could then become an academy or re-open as a trust school.
Ofsted, the education standards watchdog, will also be told it must monitor how much attention has been paid to the view of parents when it carries out a school inspection.
The White Paper also calls for the appointment of "choice advisers" as part of a £12m scheme to widen access from poorer communities to better performing schools.
Prime Minister feels the heat in the kitchen
It is not often the Prime Minister and the Education Secretary drop by your house for breakfast and a chat about schools policy. So when Tony Blair and Ruth Kelly invited themselves to Ann Jones's house in East Dulwich, south-east London, she and her friends made the most of it.
Miss Jones, her partner George Leahy and a group of other parents have been battling for five years to get a community school in their area, to tackle a massive lack of secondary education provision for their children.
They have been frustrated by intransigent council officials and infuriated by the lack of school places.
The parents have been told that an academy will open in 2008, but that is too late for many children who are due to move to secondary school next year.
Ms Jones and Mr Leahy have a daughter, Mirain,15, and son, Euryn, 10. Mirain was accepted into her first-choice school but their son is unlikely to have a similar experience. Despite living five minutes' drive from their first-choice school for him, they are not in the catchment area, and 1,000 children are chasing 180 places each year. Their second-choice school is 10 minutes away but they are also out of that catchment area.
Of the Prime Minister and Ms Kelly's visit, Ms Jones said: "Mr Blair said the White Paper should make it easier for parents like us to have our voices heard, but it is too late now.''
The main points
* All schools to be allowed to opt out of LEA control and become self-governing trust schools.
* Appoint a Schools Commissioner to link trust partners (businesses, church groups, universities) to schools.
* Trusts to set up parents' councils with whom they must liaise on the running of the school.
* Support for parents' groups to set up schools.
* Parents given the power to trigger Ofsted inspections of schools which could lead to the sacking of the head if they fail.
* Free transport for disadvantaged pupils - those on free school meals, to travel six miles to school, instead of a maximum of three miles at present - to give them a wider choice of schools.
* Schools to be compelled to provide parents with three reports a year on their child's progress.
* Legislation giving teachers a right to discipline children and restrain them if involved in fights.
* Parents to face fixed penalty fines of £50 if they allow children excluded from school to roam the streets.
* Independent schools to be allowed to 'opt in' to the state sector.
Verdict on the White Paper
Sophia Yates, mother of three from Lambeth, south London, who is one of 105 parents who have set up the first ever parent led UK state school
"I cannot see that harnessing the enthusiasm of parents in schools could be anything but good. I do not think that all schools will take advantage of these freedoms, many will just stay as they are. It will give more parents the power to do something to improve schools."
Julia Neal, history teacher at Torquay Girls' GS and junior vice-president of the Association of Teachers and Lecturers
"I am concerned about the idea of school trusts because I think it is another attempt to further privatise the education system. I do not think it has been terribly well thought out. There is a danger the curriculum might become distorted. There is also a risk that this will create a two-tier system."
Anna Trench, 17, sixth former at The Latymer School in Edmonton, north London
"My class at primary school had a wide choice of secondary schools but very few went to the local comprehensive. The Government's new proposals for business, faith and parent-controlled schools will increase the stress and pressure on pupils making decisions and the greater choice only means that there are more divisions among friends."
David Cameron, Shadow Secretary of State for Education
"Wherever the Government promotes rigour, encourages discipline and gives schools more autonomy and parents more choice, we will support them. And she's going to need all the support she can get. But eight years ago this Government abolished grant-maintained schools, so why has it taken eight years to get back to where they started?"
Sir Digby Jones, director-general of the CBI
"The contribution business makes to improving state education should go beyond the purely philanthropic. Education companies brought in by the state sector have succeeded in helping pupils overcome basic skills challenges and in turning round failing authorities. It is a pity if ideological opposition has held back good ideas to involve business that could have improved opportunities."
Margaret Morrissey, press officer for the National Confederation of Parent Teacher Associations
"I would query how realistic an expectation it is for parents to be free to volunteer to be part of a Parents Council. Parents have always striven for partnership, not power, with teachers and schools. Such fundamental change will be unsettling for children and will have a negative impact on their experience of education."
Dr John Dunford, general secretary of the Secondary Heads Association
"School leaders welcome greater freedom for schools but the the White Paper is largely an illusion. What schools need is more freedom from government interference and incessant reform. On the role of parents, the Prime Minister should not have used the words 'parent power'. Schools want to work closely with parents, not be ruled by them."