A consultation paper published this week proposes a radical overhaul of school funding which would require LEAs to hand a large portion of their schools budget straight to schools.
Schools would have the right to buy back delegated services from the LEA. However, ministers concede in the paper that councils could find it difficult to provide services to a small number of schools on a cost-effective basis.
The Department for Education and Employment paper lists four key areas where LEAs will retain block funding to provide services to all schools. But it makes plain that ministers intend to impose extremely tight restrictions and supervision of LEA spending in these.
The paper also proposes that the government could cap the percentage of schools-related funding spent by an LEA rather than by schools.
Until that cap is in place, the government 'will not hesitate' to direct an inspection by Ofsted or the Audit Commission of an apparently high-spending LEA - with errant authorities facing possible take-over by the education secretary.
The consultation paper also suggests league tables comparing LEA expenditure in each category. It says: 'The government believes accountability will be served by the widest possible circulation of information about LEA expenditure.'
Local Government Association education chair Graham Lane described this section of the paper as unfortunate in tone: 'It does rather jar with the rest of the document, there's no doubt about that.'
He said the association broadly welcomed the paper despite media reports suggesting it was effectively creating an opted-out school system.
'We are very keen on local management, but it does need developing.'
He said education secretary David Blunkett had responded sympathetically to an LGA request for the new system to be delayed five months from the proposed start date of April 1999.
A September start would allow more time to devise the delegation formula and also bring the funding year into line with the school year.
The consultation paper recognises that delegation of school meals would be a complex exercise requiring further consideration and proposes special consortium arrangements for school insurance.