Children in care will be guaranteed a place in their first-choice school even if it is already full, Ruth Kelly, the Education Secretary, said this week.

Ms Kelly gave her personal backing to The TES Time to Care campaign as she announced the change. Campaigners said it could hugely improve the education of children looked after by local authorities.

Her announcement came as The TES prepared to reveal that better schooling and care for looked-after children could save more than pound;16 billion every year - half of England’s education budget.

Research commissioned by the Government’s social exclusion unit found savings would come from reduced crime, better health and improved job prospects.

The education Bill, which passed its first parliamentary hurdle as Tories voted with the Government, will entitle children in care to a place in any school whenever they want it.

The Time to Care campaign has highlighted the problems faced by the 61,000 looked-after children who frequently move home outside the normal admissions cycle and find that the popular local schools are full.

Official figures show one in eight, or more than 8,000 children, move between three or more homes in a single year. One teacher contacted The TES with the story of a child who moved 18 times in 12 months.

Ms Kelly said: “This Bill will improve education for every child, not least the most disadvantaged and vulnerable young people in our society, such as children cared for by their local authority.

“I back The TES ‘Time to Care’ campaign - education is the key to unlocking a better life for looked-after children.”

“Our Bill will give local authorities powers to direct the admission of a child in care outside the normal admissions round - ensuring that this particularly disadvantaged group can get the best schooling for their needs.”

More than half of those in care leave school without a single GCSE and just 6 per cent gain five or more A*-C grades.

The research, carried out by the Thomas Coram unit at London university, found almost a quarter of children in care had dropped out or been excluded from school before taking their GCSEs and more than a third were homeless within five years of leaving care. The best way of improving their prospects would be to place them with better qualified carers, say the researchers. Carers are currently badly paid and do not even have to be literate.

Care-leavers make up a quarter of the prison population and growing up in care makes young people 10 times more likely to be excluded and 66 times more likely to have their own children taken into care, say the researchers.

The research looked at what happened to looked-after children born in one week of 1948, 1958 and 1970, and the effect that a better education could have had on their lives.

Rising school standards since 2000 mean that the qualifications gap between looked-after children and their peers is widening.

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The costs and benefits of educating children in care is a chapter in “In care and after” published by Routledge