THE Government’s policy of privatisation in struggling local education authorities got a boost this week from an inspection of the first authority to hand over its services.

Cambridge Education Associates had helped to instil a new sense of purpose and optimism in the previously failing borough of Islington, the Office for Standards in Education concluded.

Two years ago, a disastrous inspection convinced ministers to make the north London council a testing ground for the “third way” approach to tackling town hall failings.

Inspectors said Islington had lost schools’ and parents’ confidence, and the then chief inspector Chris Woodhead said the authority was one of the three worst in the country.

Now - a year after almost all services were contracted out to CEA in a seven-year, pound;78 million contract - inspectors returned to find that the “tide had turned”. The company had achieved all but two of the recommendations set out in their previous report and applications to the borough’s secondary schools were up almost 10 per cent.

Crucially, the authority had won back the confidence of governors and heads, at least in primaries; secondary heads had still to be won over.

The OFSTED report is timely for the Government after a series of setbacks for its privatisation policy, including the colapse of plans in Islington’s neighbour, Haringey.

Inspectors, however, said CEA faced a tough task in translating these gains into exam improvements. The contractor was only likely to meet “just over half” of its 10 key targets on improving exam results and cutting exclusions in the next two years.

CEA has been fined pound;23,000 out of its pound;600,000-a-year fee for failing to meet some targets. Inspectors said the contractor was hampered by difficulties recruiting teachers.

However, inspectors highlighted improvements in key functions. The inspection and advisory service, savaged in their original report, had been overhauled. Communication with schools had improved and there was now good support for literacy, numeracy and special needs.

Vincent McDonnell CEA’s director of school’s services in Islington said the authority was now in the top quarter of English councils, according to OFSTED’s scoring system.

He said: “This report helps us put the history of the borough behind us. People can now hold their heads up high and say: “Yes I work for CEA ... Yes, I work for Islington.”

Estelle Morris, schools minister, said the Government had entered “uncharted waters” with its policy for failing authorities and been vindicated. “It (the policy) is clearly paying off in Islington, where there had been a long history of false dawns.”

The council switched from Labour to Liberal Democrat control last year.