Tony Blair may force all new Church schools to relax their admissions policies and accept many more children from different faiths.
He is coming under intense pressure to draw up new rules for church schools to head off mounting criticism that they increase racial segregation.
The Prime Minister has already backed the Church of England's plans for a huge increase in the number of its secondary schools. But council leaders are calling for a "compromise" plan which would mean that Jewish, Christian and Muslim groups could only open new state-funded schools if they agree to embrace pupils from different backgrounds.
The plan, to be unveiled by leaders of the country's 168 local education authorities tomorrow, has already won support from Church of England education figures and sectors of the Muslim community.
Under their proposals, any newly set-up church school would have to leave a certain percentage of its admissions open to pupils from the wider community – rather than solely those of its own religion.
Stephen Timms, the Minister for School Standards who will have responsibility for steering any resulting legislation through the Commons, is to be urged to back the plan. It is designed to take the sting out of heated opposition to the original proposals, backed by the Prime Minister, for a massive increase in the number of faith-based schools.
The original White Paper on the future of education said any proposal for a new school would have to be advertised so that faith groups – or private companies – could bid to run it. However, trade union leaders and a growing number of Labour MPs say this will lead to greater segregation among children, particularly in inner city areas which have seen riots during the past year.
Labour local authority leaders say they have been told privately that Downing Street will listen to opposition to the scheme and that they should "beef up" their argument.
In their submission to the Department for Education and Skills they will bluntly spell out their concerns. "We've toughened up our stance," said Graham Lane, chairman of the Local Government Association's education committee. "We are deeply concerned about the development of more faith-based schools.
"We are saying that, if you insist on going down this road, you should be blocking proposals for voluntary aided church schools" – which give more control over admissions to the churches and have led to situations where other faith groups are barred from attending. "Instead, you should adopt a voluntary controlled approach" – where a proportion of places are allocated to the wider community – "so that you have a meeting of cultures in these schools."
Supporters of the latest application for state funding for a Muslim school have insisted it will be open to non-Muslim children. The Balham Islamic school in south London says it already has some non-Muslims enrolled. Estelle Morris, the Secretary of State for Education, told MPs last week that thousands of Muslim children were being educated in independent schools because their parents wanted a faith-based education.
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