Senior government figures are considering stripping local government of key functions in a bid to contain council tax rises.
Whitehall sources say some elements of government see council autonomy and politically acceptable levels of council tax as mutually exclusive and, faced with a choice between the two, would favour the latter.
Prime ministerial adviser Andrew Adonis is an advocate of this policy.
One source said the case for education departments had not been well made at ministerial level.
'There's a feeling that, by taking schools away, the balance of funding problem would be solved in one fell swoop, as council tax would then account for a greater proportion of a smaller overall pot of local budget.
'The government is completely divided on this. Very senior figures at Whitehall question whether education departments add value at all,' the source said.
Removal of education from council control would be the logical extension of the existing process of creeping centralisation.
'It's happening anyway. When local government lost control of the curriculum, nobody batted an eyelid,' the source added.
Another source said discussions were taking place within both the DfES and the Cabinet Office on the feasibility of centralising education funding.
'It was clearly considered as part of this year's process of education funding. It
may well still be on the agenda for the DfES.'
Sir Jeremy Beecham (Lab), chairman of the Local Government Association, said: 'This is an idea that has not yet been decently interred and is still in the air.'