The rights of private and voluntary groups to compete with local authorities to run publicly-funded secondary schools will be extended by an education Bill which will also pave the way for on-the-spot inspections.

Local authorities will be given a duty to allow private firms to bid to run schools which move site or undergo major refurbishment.

The move is an attempt to close a loophole which allows councils to circumvent their current duty to allow competition to run new schools by retaining existing schools’ names.

The latest attempt to open up state education to the private sector is likely to prove the most controversial part of the Bill to be published in the next few weeks.

Chris Keates, general secretary of the National Association of Schoolmasters Union of Women Teachers, called on the Government to ensure public services remain public.

“The speech contains no surprises and no new measures for education.

However, it is disappointing to note that after nearly two terms in office the Government is still talking about continuing to reform public services, despite having achieved so much,” she said.

David Hart, general secretary of the National Association of Head Teachers, said the private sector is not interested in running schools.

Other measures in the Bill, including the introduction of three-year budgets, short notice inspections and the replacement of the annual governors report and parents’ meetings with school profiles, had all already been announced and have been accepted by schools with varying degrees of enthusiasm.

As The TES revealed last week, the Bill will extend the power of school forums to influence how local authority funding is spent.

Ministers face a race against time to get the Bill on the statute book before Parliament is dissolved before the general election expected in May.

John Dunford, general secretary of the Secondary Heads Association, said schools would face considerable confusion if plans to introduce new inspection arrangements in September 2005 have to be postponed.

The new framework will cut the notice schools receive from 10 weeks to just a few days and the maximum time between inspection will fall to three years.

A separate Bill will extend child benefit payments to the parents of 16 to 19-year-olds who stay on in vocational training. Ministers will press ahead with the school transport Bill.

A charities Bill will require private schools to demonstrate they benefit the public if they wish to retain charitable status.

A spokesman for the Independent Schools Council said: “The great majority of our member schools are charities and we are confident that they will be able to demonstrate conclusively the immense public benefit they contribute.”

Education legislation is intended to fulfil the second half of the “security and opportunity for all” slogan that Labour hopes will help it win a third successive election.

In an alternative Queen’s speech the Conservatives pledged to boost choice by creating 600,000 more school places and to scrap exam targets.

The Liberal Democrats said, if elected, they would scrap university tuition fees.