Schools secretary Ed Balls will hand the running of Bradford education services back to the local authority, dismantling the country's biggest local education privatisation.
Education Bradford, the trading name for global service company Serco, will not see its #163;360 million contract renewed in 2011, a decade after the Government insisted local politicians could not be trusted to run the service.
Serco was brought in to take over the running of Bradford's schools after a damning Ofsted report in 2001, claiming it could bring the city's schools up to the national average by 2006. The city has yet to hit that benchmark.
In its first year the company met only five of 50 targets and earned just #163;8,450 in performance-related bonuses out of a possible total of #163;870,000. It was later criticised for negotiating lower targets to make it easier to earn bonuses.
Mr Balls said: "I will do what I can to support local authorities and to strike the right balance between support and intervention.
"I don't want there to be formal intervention in any local authority for any longer than is absolutely necessary and it will always be a last resort. One of the ways that local authorities can help make this happen is by driving improvement from within the sector."