Earlier this month, The TES revealed that ministers want to pilot different providers running pupil referral units (PRUs) on behalf of local authorities. This week, Ed Balls went further. The Secretary of State for Children, Schools and Families said he would start consultations on whether private companies should be allowed to make a profit in the process.

A “yes” would mean a major shift in English state education. Companies such as Kunskapsskolan, the Scandinavian school chain, would like to run state-funded schools for profit here, as they do in SwedenTheir results there are higher than national averages.

Despite free-market pressure, none of the main British political parties have until now backed giving private firms control of state schools - unless it is on a not-for-profit basis as an academy sponsor.

Legally, PRUs are state schools. If the Government allowed them to be run for profit, it would be difficult to argue that the rest of the maintained-school sector should be different.

The news came as David Buckingham, a professor at London’s Institute of Education who was commissioned to lead a Government inquiry into the impact of commercialism on childhood, told The Guardian that the involvement of private firms in running schools could affect pupil wellbeing.

Mr Balls denied the idea that PRUs being run for profit was a first, saying that private companies already deliver education in “youth prisons”. But he did not give any state school examples.

Any such move is likely to encounter fierce opposition. Christine Blower, of the National Union of Teachers, said: “Privatisation of education is never acceptable.”

Mr Balls said he hoped independent schools and the voluntary sector would also want to run PRUs, which are to be rebranded with a new name.

The Prince’s Trust and Fairbridge charities, and a consortium of London’s education authorities, had expressed an interest in taking part in the pilots, he said.

His white paper, Back on Track: A Strategy for Modernising Alternative Provision for Young People, says that, in future, early intervention might mean more pupils attending such units for shorter periods to avoid getting to the point where exclusion becomes necessary.

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