I used to be a strong supporter of choice and diversity and the applications of market principles to education. However, recent closer examination of how the unencumbered market actually works in the provision of free state education has shown some pretty convincing reasons why a purely market-driven approach is not the best way forward.

Despite huge increases in spending on state education, nearly 40 per cent of our 11-year-olds enter secondary school two or more years behind in reading skills. At 16, more than a third of our secondary pupils do not obtain even one A to C pass at GCSE.

Those who favour the establishment of a new selective grammar school in every town have perhaps failed to appreciate that rejection is the other side of the selection coin. In the 21st century we cannot afford to undereducate large numbers of our young people.

Moreover, the unfettered introduction of selection does not work. In Bromley, South London, nearly all schools have now adopted some form of selection. The result is that many parents have to wait until August to receive confirmation of a school place for their children.

And yet, the egalitarian philosophy which has dominated many of our colleges of education and local education authorities since the 1960s is not attractive either. All too often, this has led to levelling down of educational standards. The abolition of more than 1,000 grammar schools in the Sixties and Seventies clearly deprived many inner-city children of a good education.

The concept of the neighbourhood comprehensive is attractive if you live in a leafy suburb with a good local school but is discouraging to some inner-city parents whose local school may have become associated with low standards and poor discipline. The tragedy is that the market philosophy gurus and the egalitarians both implicitly, if reluctantly, accept that raising standards for all is too difficult.

The advocates of market forces seek to re-introduce grammar schools which by their very nature could only favour the few. Egalitarians, on the other hand, would restrict choice and impose the monolithic system of the neighbourhood comprehensive, often using particular models of teaching, ill-suited to the needs of many young people.

Is there a third way which combines the best of both approaches?

Clearly, many of the pro-market reforms of the past decade are working well and should be retained. These include: the publication of performance tables, establishment of a rigorous school inspection system, introduction of local management, a national curriculum and specialist schools.

But we need to temper the discipline of the market with the principle of inclusiveness. All children are entitled to receive a good education and indeed the nation’s future prosperity depends upon this.

The new emphasis on raising standards of literacy and numeracy in all primary schools is clearly right, as is the emphasis on returning to effective teaching methods such as phonics in reading. Tough targets have been set. However, sooner or later either local education authorities or the Department for Education and Employment will need to have the courage to close schools that persistently fail to teach pupils adequately and to reallocate their resources to successful ones.

Similarly, the teacher unions will need to temper their desire to protect members’ interests with a willingness to allow schools to get rid of poor teachers. It is an irony that our teacher unions defend so rigorously the existing contract of employment for teachers, with all of its problems.

The thorny issue of admissions to popular schools will need a careful, transparently fair and practical solution that combines the principles of choice and diversity with the right to attend a good local school. The principle that inner city and other areas of social deprivation should receive additional funding and should be test beds for innovative practices has been recognised through the establishment of the education action zones. Other initiatives, such as summer literacy schools, homework clubs, beacon schools and master classes, also have a role to play. Business and community groups must also be active, both in the provision of sponsorship and in helping comprehensive schools to modernise their management.

Above all, we will need to make the teaching profession more attractive to new graduates, especially in the sciences, IT and mathematics, and to persuade more existing teachers to remain in the profession. This will inevitably mean a greater share of the national budget being directed to education as well at the introduction of imaginative ways such as the new advanced skills scheme to retain good teachers and “golden hello” measures to attract new trainees.

The role of local education authorities must change from their traditional one of managing schools to one of ensuring good standards are delivered. The principle should be that intervention will be limited to those schools whose performance is not satisfactory.

The simple overriding objective should be to raise standards of achievement. All proposed measures should be judged against this criterion.If we could do this, we would deliver a new inclusive approach to excellence which would attract considerable support across the political spectrum.

Sir Cyril Taylor is chairman of the Technology Colleges Trust