A third-term Labour government should replace raw league-table scores with a star rating based on parents' views as well as a school's exam performance, Alan Milburn, chancellor of the Duchy of Lancaster, said.
Mr Milburn told the Social Market Foundation think-tank that the Government should "give power to the people".
"In a world where people are better informed, the job of government cannot be to assume responsibility for everything from the litter on the streets to children's behaviour in classrooms," he said.
Local communities could have new rights to challenge and even close services that are consistently bad.
Mr Milburn said: "Users' views about performance could form a growing proportion of the scores given to local services in the league tables and performance measures published by central government."
Giving schools a rating would help move attention away from raw league-table scores which critics argue are unfair on schools with disadvantaged intakes, a spokesman for Mr Milburn said.