Islington council in north London will accept the report but points to figures showing that about 43 per cent of parents, nearly all middle-class, choose to send their children to secondary school elsewhere.
Council officials have agreed to co-operate with ministers in a privatisation of council services that is likely to be the most far-reaching to date.
The report from the Office for Standards in Education (Ofsted) is said to be even more devastating than the one that condemned the neighbouring London borough of Hackney and the remedy is certain to be more drastic: only two of Hackney's services are being contracted out to a private company.
Islington's schools went to the top of the political agenda when Tony and Cherie Blair decided to send their two sons six miles across the capital to the London Oratory.
The council said yesterday it accepted the need for radical changes but that criticisms must be seen in the light of the borough's social problems. About 40 per cent of those in social classes A and B send their children to secondary schools in the neighbouring borough of Camden. The figure for those in social classes C and D is only 2 per cent.
Leisha Fullick, the council's chief executive, said: "We accept that something really radical needs to be done. There are severe problems with our secondary schools. We need to give the whole community confidence in our schools. At present they are not genuinely comprehensive, they are secondary modern. We all know children do better in a genuinely mixed environment."
One plan is for a new partnership board of parents, councillors and businesses, which would offer policy leadership and advise the council, bypassing the education committee.
Andrew Roberts, the borough's chief education officer, who has just produced his own critical report of the authority, said: "We know we could do better with the children we have but what will really make the shift is persuading the people of Islington to send their children to our schools."
While Islington's primary schools chalk up national test results close to the national average, though below the average for London, at GCSE the pass rate is barely half the national average.
Jeremy Corbyn, Labour MP for Islington North, and his wife, Claudia, said last week their marriage had foundered over her refusal to send their son to the borough's schools.
Islington, in partnership with the Department for Education, will invite consultants to look at its services: it is not being compelled to do so by David Blunkett, the Secretary of State for Education. Mr Blunkett is giving the authority three months to come up with a solution.
The Ofsted report talks of "deep-rooted and longstanding problems" in the borough and a second report from the Audit Commission questions whether the education authority is giving value for money.
Some observers believe that publication of the reports has been brought forward after critics accused the Government of failing to carry through privatisation threats in Hackney.
Headmasters from up to 40 independent schools are to begin a challenge at the European Court of Human Rights against laws forbidding corporal punishment.
The schools will argue that their pupils' parents should be able to select a school that smacks children - a right that the School Standards and Framework Bill will remove.
The Christian Schools' Trust, of which many of the 40 are members, met in Derbyshire yesterday and heard that its application may be filed in Strasbourg this month.