Plans to find an alternative to school for excluded and vulnerable pupils will include testing out virtual pupil referral units and centres run by private firms and charities.

The pound;26.5 million pilot scheme, set out in a confidential Government discussion document seen by The TES, calls for an overhaul of provision, with more specialised support for pupils’ differing needs.

It suggests a new statutory curriculum for pupils outside the school system, requiring that at least the “core subjects” of English, maths and information technology are covered, alongside classes in social and emotional skills and 14-19 diplomas and apprenticeships.

At present, the law requires pupil referral units (PRUs) to offer only a “broad and balanced curriculum”. The plans follow the admission by Ed Balls, the Schools Secretary, that the units are “not good enough”.

Ofsted has also rated one in eight units as inadequate, and said substandard units were contributing to a poor education for deprived pupils.

Ministers intend to set up 10 three-year pilots by September 2009, including three starting this December. They want local authorities to bid for the projects, which would include an “e-learning and virtual PRU” that uses technology to offer pupils a wider curriculum than they might otherwise receive.

The document suggests another experiment could see special schools catering for pupils who would normally attend the units. It also says the pilot should include schemes such as studio schools, that allow pupils to work in a business-based environment.

The plan to involve charities and private firms in running the units follows calls last year from the Conservatives for such a scheme.

But John Bangs, the National Union of Teachers’ head of education, said: “Commissioning and outsourcing of services doesn’t seem to me to be the problem that needs tackling. The problem is the historical isolation of PRUs in relation to the mainstream, and that doesn’t get tackled by changing the provider. It could make it worse.”

The document also suggests that units could be run by schools, working alone or in groups, and that they could share their sites.

Teachers working in the units are to be given more support and training under the plan.

“We know that networking between colleagues working in PRUs and other alternative provision can be a key source of ideas, advice and professional support,” the document says.

It confirms the Government plan to publish data - including attendance, progression, value-added and general wellbeing measures - for pupils not on the school roll in order to motivate local authorities to improve their performance

Legislation will be needed to implement the Children’s Plan pledge to strengthen ministers’ powers to intervene when PRUs fail and requiring local councils to replace them with a specified alternative.

Ministers plan to publish statutory guidance on alternatives to the units in 2009-10, using information from the pilots.