RADICAL solutions, including vouchers, are being considered by Downing Street to tackle the problem of failing inner-city schools.

Schools standards minister Stephen Timms has held a confidential meeting with the Adam Smith Institute, a right-wing think tank, and is said to be “entirely open” about more private-sector involvement in education.

The Prime Minister is known to be an enthusiast. Chris Woodhead, the former chief inspector of schools, says in his book to be published next week that Mr Blair does not suffer from “ideological hang-ups” about privatising education.

It is understood that Downing Street’s policy unit is already talking about vouchers which have traditionally been associated with politicans on the right of the Conservative party. Under such a scheme parents would be given vouchers worth a specified sum to spend wherever they choose on their child’s education.

Conservative vouchers for nursery education were abandoned by the present Government when it came to power in 1997.

Sources believe that ministers are ready to embrace radical policies and that Mr Timms used the meeting with the Adam Smith Institute to review the options.

On a trip to the US last week, Mr Timms expressed admiration for Republican President George Bush’s new education Bill. This does not mention vouchers - a central plank of Mr Bush’s election campaign - to ensure Democratic support. But the proposed policy involves them in all but name.

If a school fails to make adequate progress after three years, disadvantaged pupils will be able to use federal funding to transfer to a higher-performing private school or to buy private tuition.

Mr Timms is said to be “intrigued” by controversial ideas such as payment by results for private companies involved in education, particularly in the area of special needs.

This might mean paying firms for raising a child’s reading age by one year within a specified time.

He is also keen to learn about models in other countries and has shown particular interest in the Danish system, which allows parents to set up private schools with state subsidies.

Officials at the Department for Education and Skills confirmed that Mr Timms had held a meeting with the Adam Smith Institute but refused to say what had been discussed.

A spokesman said: “The meeting was private, one of many that the minister has with interested parties and advisers all the time. It was an opportunity to hear ideas on education.”

Payment by results is already a feature of agreements between the private sector and the local education authorities whose services they run, with firms facing financial penalties for failing to meet targets.

A spokesman for the National Union of Teachers said: “Schools are not markets and children are not products. The market-driven approach to education ignores the broader picture and the need for a wide-ranging education.”