Primary pupils should be grouped by ability and tested every eight weeks to ensure they are keeping up with the rest of the group, a new report claims.

Fade or Flourish, compiled by the Social Market Foundation, the pro-market think tank, suggests that literacy in primary schools is best taught in small, ability-based sets. Children would be assessed in September, then placed into groups. Reading levels would then be tested every two months, and pupils would change sets, depending on how they compare to their peers.

Claudia Wood, a research fellow for the foundation and author of the report, said: “There’s a lot of controversy around setting and streaming.

But teachers teach better when they have a group with similar abilities.”

“In a mixed-ability class, high-ability kids can be left to read by themselves, while teachers help the low-ability kids. But if all the abilities in a group are the same, then you can pitch the teaching at the right level.”

Alternatively, she suggests, pupils should sit at different tables according to their ability. The teacher would then move from table to table, setting separate work for each group.

“All these suggestions require greater trust in teachers’ ability,” said Ms Wood. “Children progress at different rates. So ability groups that don’t change throughout the year are pointless. Teachers know the children really well, and know exactly what progress each child is making.”

But Sue Palmer, literacy consultant, questions whether this is a useful approach.

“You’re engendering a competitive, win-or-lose philosophy at a very early age,” she said. “Testing doesn’t make children literate. It just makes them able to pass tests. “Literacy is one area in which all must have prizes. If you go in for winners and losers, society is the overall loser.”

These recommendations are based on the Success For All literacy programme, developed in the United States. It is used in around 2,000 American schools. Controlled experiments suggest that it has had a significant effect on literacy levels.The scheme teaches literacy in daily 90-minute blocks, compared with the one-hour lessons outlined by the UK’s national literacy strategy. Within such groups, children work in pairs, helping one another to read.

The report, which will be published next week, also recommends that pupils who begin to fall behind should be given intensive bursts of one-to-one teaching.

“The kids aren’t stupid,” said Ms Wood. “They know who’s in a higher or a lower set. But everyone moves between groups.

“There’s no stigma attached to lower groups. Kids who are struggling are given intensive catch-up lessons, so there’s no sense that they’re stuck in a rut.”

And parents would be encouraged to become more involved. The foundation recommends that schools invite parents into the classroom, to help children during literacy hour. This would also enable parents to use complementary approaches when reading with their children at home.

Steve Sinnott, general secretary of the National Union of Teachers, attacked the report.

“Those who pontificate about how classrooms should be organised should stop it,” he said. “The professionalism of teachers should be respected, rather than any group suggesting there’s a single method that’s appropriate to every child in every setting.”