Increasing competition between schools - a key Government policy - does not improve standards, the most highly respected survey of international education concluded this week.
In a damning indictment of the Coalition's free schools policy, the fourth report on Pisa (Programme for International Student Assessment) said that countries that encourage schools to compete for pupils do not achieve better results.
The comments came as the UK dropped down Pisa's worldwide rankings, showing that Britain's 15-year-olds were performing less well in maths, science and reading than pupils in Liechtenstein.
Education secretary Michael Gove has made free schools - which will allow teachers, parents and charities to open their own schools and compete for students - a key component of his efforts to improve results in England.
Mr Gove has also regularly cited the UK's falling position in the Pisa league table as a reason for pushing his radical reform agenda.
But according to the report, increasing competition between schools will not boost performance across the system as a whole.
"Countries that create a more competitive environment in which many schools compete for students do not systematically produce better results," the document said.
"While students who attend schools that compete with other schools for student enrolment perform better than students who attend schools that do not compete with other schools, the cross-country analysis suggests that systems as a whole do not benefit from higher rates of school competition."
The conclusion will fuel criticism that free schools will benefit middle- class parents who set up them up, but do little for the disadvantaged.
Sweden's free school system, which has partly inspired the Government's policy, took a hit with its previously high ranking falling more quickly than the UK's.
John Bangs, of London University's Institute of Education, said: "It's impossible for the secretary of state to say he is not going to have schools competing for pupils by creating free schools, but the report shows that competing for pupils is counter-productive to high standards for all.
"The key to success - in places like Shanghai - is collaboration, not competition, and it is for Michael Gove to realise that there are key parts to his policy that he must change," he added.
Professor Alan Smithers, director of Buckingham University's centre of education and employment, said the Coalition was being persuaded by the "illusion" that free schools produce better results. "What happens is you have other schools where the children simply end up in, and whose parents don't care about education or perhaps don't know how to get their children into those schools."
Finland was again one of the highest performing countries, coming second only to South Korea in reading scores.
At a press conference called by the Finnish embassy in London, Sirkku Kupiainen, a special adviser on assessment at the University of Helsinki, said that free schools had increased the performance gap between schools in Sweden and had increased selection in Denmark.
Andreas Schleicher, head of the Pisa programme and author of the report, said Sweden's problems were not due to greater school autonomy but were a result of a non-existent inspection regime.
Schools minister Nick Gibb said all of England's free schools will be subject to a "very strong" inspection system and "rigorous" national tests.
He added: "We are taking the best of what works from around the world and applying our own checks and balances to ensure absolute fairness."