Ministers last night gave way to pressure from the churches and abandoned fast-track opting-out for church schools.
The Nursery Education and Grant Maintained Schools Bill, published yesterday, does not include a fast-track to opting out.
The U-turn was humiliating for the Prime Minister, according to Labour. The measure for church schools is the second education policy to be dropped since the Queen's speech in November
Only a month ago, the Government was forced to drop its Bill to privatise student loans, after banks refused to take part.
David Blunkett, Labour's education spokesman, said: "The Government's legislative programme is coming apart at the seams. In effect, two-thirds of their legislative plans have now been dropped."
Robin Squire, the schools minister, said 2,000 responses had been received to the fast-track consultation paper. "The churches and their schools do not want special treatment, but feel that the same procedural arrangements should apply to them as apply to other schools.
"There is support for maintaining the existing arrangements for applying for grant- maintained status and particularly for the role of parents."
The Bill makes no mention of the Prime Minister's promise to extend grant- maintained status to all schools. However, Mr Squire made it clear that the commitment remained. Longer term options were being examined, he said.
Both the Anglican and Roman Catholic churches were angered by the proposal that school governors should be able to decide on opting out without the parental ballot required in other schools.
Faced with a revolt from Anglican bishops in the House of Lords, the Government gave way.
The church schools proposal provoked one of a series of disagreements between Gillian Shephard, the Secretary of State for Education, and the Prime Minister. Mrs Shephard is understood to have advised Downing Street against the proposals which were announced by the Prime Minister last September to boost the flagging opting-out programme.
The short 10-clause Bill aims to expand nursery education for four-year- olds and to allow grant-maintained schools to borrow against their assets from private sources.
Mr Squire said: "This new facility for grant-maintained schools would bring them into line with colleges and universities. It would allow increased investment in grant-maintained schools."
The Secretary of State for Education will have the power to give grants for nursery education so that money given to local authorities for under- fives can be redistributed to parents of four-year-olds as vouchers.
Peter Smith, general secretary of the Association of Teachers and Lecturers, said: "Parents and voters want a properly funded education system, not schools living on tick."Reuse content