The arrival of management consultants at the Victorian offices of Liverpool's education department has sent shock waves through the senior ranks of officers who run local authorities.
The fact that ministers are prepared to contemplate inviting the private sector to take over the management of key services provided by a city the size of Liverpool must mean the fate of others is also in the balance.
Nord Anglia, the education services company quoted on the Stock Exchange, has already won the contract to take over the advisory service to schools and the ethnic-minority achievement service in Hackney, and management consultants are camped in Islington's education department.
However, the fall from grace by Hackney and Islington was far more predictable given that they are small London boroughs that have only been required to run an education service since the abolition of the Inner London Education Authority nine years ago.
For the first time in their history, all local education authorities are being inspected and the evidence from the first 30 reports appears to suggest a significant number are not doing the job particularly well.
Last June, inspectors described Manchester's service as being beset with problems and suggested some of its schools were facing a spiral of decline. The London borough of Tower Hamlets was said to have made poor use of the large amounts of public money provided to run its schools.
Inspectors who went to Barnsley in South Yorkshire reported that the authority has just about managed to keep basic services going and has no strategy for raising school standards. In rural Norfolk, there is a large number of failing schools and the inspectors pointed to failings in the advisory service.
However, there are those who complain that there is a lack of consistency in the judgments made about local services, and say there is an element of rough justice about the system.
Inspections are carried out by OFSTED, but the decision to send in the management consultants is taken by Estelle Morris, the standards minister, acting on advice from the standards and effectiveness unit and her chief adviser, Michael Barber.
According to Mr Barber, Islington, Hackney and Liverpool are worse than any others inspected since the Government has had legal powers to intervene directly in the running of a local education service. Calderdale in west Yorkshire might also have lost its services after its emergency inspection in 1997 if the legislation had been in force when OFSTED found weaknesses.
Inspection reports do not grade local authorities and, in theory, there is no failure category. In reaching the decision to require a local authority to prepare its services for the private sector, ministers also take account of whether the senior professionals running the service appear to be capable of taking the steps required to improve it.
Ministers have to determine whether locally-elected politicians are up to the job. The inspection reports on the three that are now going to lose some of their education service criticise councillors.
In Liverpool, the council is accused of underfunding schools; in Islington inspectors are scathing about the way councillors do not take responsibility for the service; while the Hackney report points out that job of chair of education was being rotated between the four political groups.
In Calderdale, the inspectors reported that the members interfered with the work of professional staff so much that the director and his staff did not have the time or professional autonomy they needed to implement the committee's policies or frame policy advice.However, Christine Whatford, president of the Society of Education Officers is confident that special measures will be required in only a tiny minority of local authorities.
"I don't believe there are any more failing local education authorities than failing hospital trusts or other comparable institutions," she says.
There is little doubt that the common factor in the three areas about to lose their services is that they are managed by councils paralysed by internal political conflict. For more than a decade, Liverpool's council has been convulsed by splits in the Labour group and before that by the turmoil associated with the rule of Militant and Derek Hatton.
Hackney councillors have also been preoccupied with party splits. Political control in Islington is finely balanced with Labour only managing to stay in power with the casting vote of the mayor.
In Newham's case, inspectors praised the determination of the council not to tolerate failure, while at the same time noting that standards in the schools are low.
In Kent, the country's largest local authority, inspectors pointed to weaknesses, but acknowledged the determination of elected members to tackle the problems.
Inspection of the country's education services is barely half-way through, but by the time the process is complete central government may be forced to take hard decisions about the future of a service which is in theory managed by elected councillors. In Liverpool, the director, Frank Cogley, was out of his office within days of a critical OFSTED report, but the councillors remain.
Traditionally, central government has taken the view that councils are answerable to their electorate who will vote them out if they provide poor services. That relationship has irrevocably changed because ministers have the power to order councils to put out their education service to the private sector. For all involved the stakes are high. Parents will blame ministers, not their local council, if the private sector fails to bring about improvements in their children's schools.
* Before the legislation was in place seven councils agreed to be pilots. They were Staffordshire, Kirklees, Barking and Dagenham, Bedfordshire, Cornwall, Birmingham and North Somerset. Calderdale and Hackney volunteered to be inspected. Authorities that have been inspected under the legislation are: Bury, Kent, Kingston upon Thames, Leicestershire, London boroughs of Brent, Newham, Southwark, Tower Hamlets, Hackney, Islington, Lambeth and Bromley, Manchester, Norfolk, Nottinghamshire, Sandwell, Sunderland, Surrey, Barnsley, Buckinghamshire, City of Kingston upon Hull, Durham and Northumberland.
ON THE LIST
* The DFEE has approved six companies to advise on the extent to which LEA services should be contracted to the private sector: KPMG; Lorien; Capita; Office of Public Management; PriceWaterhouseCoopers and Arthur AndersenBirmingham LEA.
The companies which have been approved to tender for services are: Arthur AndersonBirmingham LEAAPS Keele; Cambridge Education Associates; Nord Anglia; Hampshire LEA; The Education Partnership; Capita; CfBT; Essex LEAWindsor and Co; Include and CEM consortium.