An “Enron-style” scandal is threatening to engulf the President’s school reforms following allegations that the “Texas education miracle” that inspired them was a fake.

Seemingly dramatic results were achieved in Houston, Texas, when Rod Paige, now US education secretary, was schools chief and George Bush was the state’s governor. But in a succession of bombshells from the city, it is now claimed that key educational performance statistics were falsified or inflated.

As the Houston strategy was the model for Mr Bush’s national one, the charges cast serious doubt over White House schools policy.

Mr Paige’s success in America’s seventh-largest education authority - driving up test scores and other key performance measures across 212,000 students from 1994 to 2000 - catapulted him into America’s top schools post in 2001. The strict targets regime he introduced there, borrowed from business boardrooms, is a cornerstone of Bush’s drive to buck up America’s ailing state school system.

Last year, Houston pocketed a cool $1 million and the accolade of America’s best urban school district, largely on the strength of the strides made under Mr Paige. He brought in lucrative financial incentives for success and stiff punishments for failure. But there is growing evidence that these, as well as raising exam scores, spurred schools to fix the figures.

In August, a Texas Education Agency audit uncovered under-counting of drop-outs as schools vied for $10,000 bonuses for exemplary attendance.

Belying Houston’s claimed 1.5 per cent drop-out rate, it ranked a lowly 84th among US cities, with just 49 per cent of high-school students graduating in 2000-1, according to research by Walter Haney of Boston College’s center for the study of testing, evaluation and educational policy.

Last week, Paige was rocked by a New York Times report that 2,330 assaults have gone unreported in Houston schools in the past four years. Principals are also said to have inflated the numbers going on to college.

Most damning though is evidence that schools held weak 15-year-old pupils back a year rather than let them progress to take high-stakes tests, a policy critics fear may have driven large numbers to drop out.

In 2001-2 there was a staggering 21.5-times more 15-year-olds than 18-year-olds in Houston schools, versus a statewide multiple of just 1.6.

Walter Haney said: “School officials are told,‘You better get test scores up (otherwise) you’re going to lose your job or we’re going to close your school’. Under that pressure some people will resort to anything.” He compared Houston’s alleged statistical chicanery to the tactics of the city’s disgraced business icon Enron.

But Houston officials defend the very high test scores. “Our children really did make that academic progress. It’s all confirmed test-by-test, student-by-student by the state of Texas,” said a spokesperson.