A pound;1 million contract to manage a special needs school has been won by a for-profit company in a ground-breaking deal.
The Priory School in Taunton, Somerset, will be run by a private business that will supply a leadership team and extra support to pupils suffering from behavioural problems.
It is believed to be the first time an agreement has been reached to hand over day-to-day control of a special needs school to an outside business.
The Government wants to open up the provision of pupil referral units for excluded and vulnerable children to profit-making businesses, but remains opposed to similar deals for other state schools.
The arrangement between Somerset County Council and Lilac Sky Schools, which has been awarded the Priory contract, pushes that ban to its limit. While Lilac Sky will take a profit, the council remains in ultimate command.
A similar deal was done with a mainstream secondary school, Turin Grove, in Edmonton, north London, which is managed by American education firm Edison. Its three-year contract comes to an end next year.
The Tories are committed to opening hundreds of new schools run by different organisations if they win power, but they are also against state schools being set-up for profit.
The Priory School is for boys aged 11 to 16 with behavioural, emotional and social difficulties, and has been in special measures since December 2006. The most recent monitoring visit from Ofsted said it was making satisfactory progress, but the local authority wants rapid improvement.
Part of the new deal is an expectation that the school will come out of special measures within 12 months of the start of the contract in January 2010.
The council has defended its use of outside consultants, saying that the key issue is high-quality education for pupils. The five-year deal will allow for sustained improvements at the school, it said.
Trevor Averre Beeson, managing director of Lilac Sky Schools, will become The Priory's executive headteacher. There will also be a head and another senior leader, as well as visits from behaviour experts as part of the contract.
Mr Averre Beeson, who was the first head at Turin Grove under the Edison contract and has a track record of cutting exclusions, said he is confident that his approach will work in a special school.
"Our target is to get the school out of special measures within two terms," he said. "We are quite certain that our positive approach to schooling and leadership will greatly improve the life chances of the young people in the school."
Mr Averre Beeson has said that he is "unashamedly working to be profitable" for his shareholders, but that there will be no "excess" profits.
But the involvement of private businesses in managing state schools has been criticised by some.
John Bangs, head of education at teaching union the NUT, has described the move by Somerset as an "abdication of its responsibilities".