Hackney'S schools should be taken over by an education action zone - led by the private sector if necessary - if the east London authority fails to improve, a Government hit squad has told ministers.
The final report of the improvement team again condemns Hackney's decision to separate the education department from the key services which support schools, saying the fears it had on arrival a year ago have been proved right.
School and council finances remain chaotic and inaccurate, while support for information technology is non-existent, it says.
In a double whammy for the authority, the report also recommends it should scuttle its flagship proposals to reopen Hackney Downs School - a key Labour pledge in May's council elections.
But positive changes can be seen within the education department, says the report, thanks to Liz Reid's arrival as director in April and the appointment of other key staff to create some stability.
Hackney's problems will not end with the improvement team's departure. The Government has already agreed to the report's demand for a further inspection before Easter by the Office for Standards in Education and the Audit Commission.
School standards minister Stephen Byers said the Government would not hesitate to use its new powers to take over if changes were not made.
That leaves Hackney in a similar position to a year ago - awaiting an OFSTED report and the possibility of a hit squad. Barring the appointments, the key concerns remain unaddressed. But any future hit squad will have teeth - Richard Painter's team was there under council sufferance.
Mr Painter said: "Hackney isn't beyond saving itself. We've been there a year and the quality of service has improved in the education department. But the quality of support services to education has not improved.
"I don't believe it's beyond the wit of man to improve and if they have got the will to improve they could do it very rapidly, in three or four months. If they haven't by next April, the solution might be to look at the possibility of education action zones. It's up to them."
Ms Reid has already made her mark, reversing cuts to the language support service. But she is not part of the council executive and has no control over several areas, including post-16 education and school-business links.
The council's Transforming Hackney reorganisation created separate "trading units" for finance, personnel and IT. The report says the units do not understand education and have created mistrust among schools. Heads have taken on the responsibilities instead, including some areas such as accounting for which they do not have the skills.
If services do not improve, the report says, all 72 schools in Hackney should be split into two education action zones.
"Under the present circumstance in Hackney, we believe that only the private sector would be in an effective position to prepare a new bid," the report says.
Labour, which now chairs the education committee in Hackney and is two seats short of a majority, welcomed the report, saying it had never supported the new council structure. It also backs a zone bid, even a private sector one.