The Prime Minister outlined in a speech in Birmingham to GM heads and governors four incentives for schools to opt out: relaxation of admissions procedures, new borrowing arrangements, a fast track to GMS for church schools and the retention of the full proceeds of property sales.

Attempts to rewrite admission procedures for GM schools will almost certainly not be completed until 1997 while other incentives will need approval in the House of Commons where he has a tiny majority.

Changes to rules over the sale of assets which would allow GM schools to keep all, instead of half, of the money will require primary legislation and are certain to face hostility in the House of Lords from bishops loath to give up church land, as well as some MPs.

While church schools have been offered a fast track to opting out with the possibility of scrapping parental ballots, the indications are that most do not intend to take advantage of this route. Detailed consultations with diocesan directors begin next month.

Senior sources within the Grant-Maintained Schools Foundation are already promoting the idea of opting-out decisions being taken by governors and headteachers with parents having to petition against it.

Allowing GM schools to borrow on the open market, in line with colleges and universities, is the only piece of legislation that has already been written.

Mr Major also pledged to use goals announced this week for four-year-olds as a basis for measuring progress through primary schools. His chief adviser and the man responsible for the new nursery targets, Sir Ron Dearing, is understood not to have been told of this plan.

Welcoming the prime minister’s initiative, Gillian Shephard, the Education and Employment Secretary, said: “We believe there are real advantages from self government for schools, we think it is the right way forward for all schools. ”

Mr Major also outlined plans for a national funding formula. He conceded that the common funding formula, in place in 22 education authorities, was not perfect.

The DFEE and the funding Agency for Schools are currently working on the scheme. It is unlikely to be introduced before the general election as it will produce winners and losers.

Meanwhile, it emerged this week that the FAS is being taken to court in a row over whether it is over-funding its own sector at the expense of local authority schools.

The London borough of Bromley has been granted a judicial review of the way the agency interprets the rules governing the distribution of money to schools. The case will test the council’s claim that the FAS is being unreasonable in accepting estimates of pupil numbers from heads of GM schools as the basis for setting budgets. Bromley maintains that the calculation has resulted in an extra Pounds 250,000 for the area’s 14 GM secondary schools.

The council has now decided to encourage its three remaining secondary schools to go GM. It believes it can no longer maintain its stance of neutrality on opting out and it does not want its own schools to be at a disadvantage.