From the wooden gate at the top of the small playground next to Lowick primary school you can look beyond a copse of trees and a drystone wall to the hills of Coniston and the wooded fells on the far side of Crake valley.

Inside the slate grey Lakeland stone of this Cumbrian school building are two small classrooms crammed with every conceivable sign of education and youthful endeavour.

It’s the last week of summer term, and the school and its surroundings are filled with sunlight and colour. It’s an idyllic scene. But for Lowick’s two teachers, 19 pupils and numerous parents and governors, this is the end of a far from idyllic journey and the start of a new era. On August 31, Lowick primary ceased to exist. Cumbria County Council ordered it to close because of “surplus places” across nine local schools. But this term, Lowick New School has emerged from a three-year struggle to become Britain’s sole co-operative school.

It may seem unlikely, but this tiny primary, perched on the edge of a rolling valley on the south side of the Lake District, is being hailed as the beacon of a new movement in British schooling. Mervyn Wilson, principal of the Co-operative College in Manchester and co-author of Co-operation and Learning, certainly believes so. “Five years down the line, Lowick will be seen as pioneering,” he says. “It is blazing a trail for others to follow.”

For Shirley Rainbow, headteacher since 1985, it has been “a long, hard road”, littered with hearings, appeals and campaign meetings. “We’ve been at it for two-and-a-half years, and now we are rising from the ashes,” she says.

The story of Lowick’s fight for survival is a tale of a small community in conflict with a distant authority. It’s also about a community that came together to save a local asset, and grew into a group of committed citizens who have devised a new structure for democratic school management and rural regeneration.

“It’s been blood, sweat and tears,” says Rose Bugler, parent chair of governors at the old Lowick school and a driving force behind the co-operative venture. “But we’ve created something unique, and we know it can work. It’s an idea whose time has come.”

Lowick was built by public subscription in 1856 on a site decreed by a trust deed dated 1757 to be used as a school “beyond the memory of man”. In the 1950s, a schedule signed by the Queen transferred trusteeship to the Carlisle diocese of the Church of England.

As in many small rural schools, pupil numbers have fluctuated over the years. “We’ve been up to 50, and down to 19,” says Ms Rainbow. But the school has remained a focal point for the 200-strong community, alongside its 17th-century pub and 19th-century church.

After its last Ofsted inspection in 1999, one inspector told staff: “This school is worth fighting for.” So, in 2001, the community rallied round when the local education authority announced its intention to close the school. “There was uproar,” says Ms Rainbow. “At our first meeting, the school was full. We had nearly 100 people, including parents, past parents, parish councillors, future parents - and nobody was for it.

“The council officers thought the school would fizzle out. It’s happened in lots of rural schools where people lose hope. Here, nothing could have been further from the truth.”

A group of 50-plus villagers, parents, governors and teachers began to organise, taking their case to the council’s cabinet, then to its school organisation committee. They called for a judicial review. Each time the group returned with fresh arguments. It all seemed to no avail when in September 2003 the council announced the school had one more year.

But by this time, Ms Bugler had hit on a radical notion: let them close it, and the campaigners would reopen as a new school run by and for the community. Ms Bugler works for a rural regeneration agency called Voluntary Action Cumbria, supporting social enterprise in small communities. “I suddenly thought, ‘Wouldn’t it be interesting if we could find a co-operative solution to this?’ We’d been working like a co-operative anyway, and the school had become the hub of an energised collective spirit.”

The group formed the Lowick and Blawith Educational Trust and secured a pound;28,000 grant from the co-op movement’s charitable foundation, Co-operative Action, to examine how a co-op school could work. They discovered it had never been done in the UK but, under the 2002 Education Act, “minority groups” with a distinctive ethos can propose new schools.

It’s this legislation that has led to the increase in faith schools, and has enabled a Montessori school in Brighton to gain state funding.

“Our community is our minority group,” says Ms Bugler, “and our ethos is that of the co-operative movement, the principles and values it has built up over more than 100 years. There are other schools that apply co-operative ideas in their teaching methods, but none applies them throughout their operation - in curriculum development and in the management of the school.”

Parents, governors and villagers came together through newsletters, online chatrooms and “design a school” workshops to discuss the ideas. With the help of Gareth Nash from a regeneration group called Co-operative and Mutual Solutions, and a firm of sympathetic solicitors in Manchester, they devised a structure that they say not only fits the legal requirements of the legislation, but meets many of the Government’s education priorities too - on citizenship, extended schools and lifelong learning, not to mention school independence.

But, in July, Cumbria rejected the trust’s plans and in August a Department for Education and Skills adjudicator upheld that decision, forcing Lowick to reopen as an independent.

The new school is no longer church-controlled, but is an independent co-operative school run by what Mr Nash calls “a suite of organisations”, including the trust, which holds the lease, and an industrial and provident society for community benefit, called Community Learning Lowick, which shares the premises and overheads and delivers “community-led activities”.

“Teachers, parents and community members are all members of the co-op in the same way you can be a member of a workers’ co-op or a housing co-op,” says Ms Bugler. “Governors are elected by the members, but all have a say in how the school is run and how the curriculum is taught.”

The co-op ethos runs through the school’s teaching and management, she says, in the same way a Christian ethos pervades a church school. The democratic structure ensures the national curriculum can be tailored to the co-op’s priorities. And, through its community learning arm, the school will also be a focus for activities such as art, adult education, IT training, health advice, and perhaps even a community newspaper.

With the co-op movement as its “incubator”, the school is able to draw on a wide range of funding, and can generate income by selling services and products. Twenty co-op shops in the area are already selling a CD recorded by a former pupil in support of the school, and a calendar will go on sale in October. The school is also collaborating with the nearby John Ruskin centre at Brantwood on art and education projects.

“A school and community are interdependent,” says Ms Bugler. “It’s like a tennis ball - it’s made of two tongues of material, but it only bounces when you’ve got them interlocking together.”

The school will draw on the skills and experiences of co-op members, who will create a “resource bank” for staff and children. It will also apply the co-operative movement’s “well established best practice” in developing membership and participation. “This doesn’t pay lip service to parental involvement,” says Ms Bugler. “It’s way beyond that; it’s parental engagement.”

“The model isn’t going to be unique to Lowick,” says Stephen Youd-Thomas, head of strategy at Co-operative Action. “It’s one we can pick up and drop almost anywhere. There’s been lots of interest already from urban schools with active parents who are realising schools are fantastic assets for regenerating local communities.

For Mervyn Wilson, Lowick was a test case of the potential of the 2002 act.

“All we’ve seen from it so far is an extension of faith schools,” he says.

“Lowick was a test of whether it was genuinely about diversity in education.”

The new school, which is non fee-paying, has already had pledges of financial and in-kind support, though the staff and co-op members know it is going to be tough, and intend to reapply for state funding as soon as they can.

“They’ve fought against massive odds,” says Mr Youd-Thomas. “But they’ve brought the community together and learned a lot; that learning won’t be wasted. The community will still have an effective school and will benefit from the co-operative structure and ethos. But it’s a loss because, as a state school, it would take on real beacon status.”

Co-operation and Learning, by Mervyn Wilson and Mick Taylor, pound;8.50, is available from the Centre for British Teachers. 0118 902 1000, marketing@cfbt.com. Lowick new school: www.enterprisingcommunities.org.uk FORWARD TOGETHER

Co-operative enterprises are owned and democratically controlled by their members. They adhere to well-established principles of equality, equity, concern for community and social responsibility.

That doesn’t mean they are necessarily small. The largest farming group in the UK, Farmcare, is a co-op, for example, as is the largest independent insurance agent, CIS. The Co-operative Group has an annual turnover of more than pound;8 billion and employs more than 90,000 people. Globally, 700 million people are members of co-operatives in nearly 100 countries.

“The difference with other big business,” says Stephen Youd-Thomas, head of strategy at Co-operative Action, “is that there are no shareholders getting rich on the profits. We do make a surplus, but it’s reinvested in the business and used to educate the members as active citizens using co-op values.”

While Lowick is believed to be unique in the UK, there are successful co-operative schools in many countries, including the United States, Sweden, Canada and Spain. Some of the ideas of co-operative education are catching on here, however; one school in Wales is consulting on the idea of becoming a co-op, while a group of schools in Herefordshire and Worcestershire have set up a consortium to share services. In the north-east there’s already a supply teachers’ co-op and a music teachers’ co-op.

The Co-operative Group is sponsoring nine schools applying for special business and enterprise status based on co-operative principles. So far five have been successful. And the Trade Craft co-operative in Cleveland has started a Young Co-operatives pilot in secondary schools to encourage fifth and sixth-formers to set up enterprises selling fair-trade products.