AN SNP-led council is considering becoming the first local authority in Scotland to create an arms-length trust to run schools.
The radical proposal, echoing education reforms in England, could result in schools devoting more time to specialist subjects and even seeking financial support from the private sector.
Although the idea is not supported by the SNP government at Holyrood, David Berry, East Lothian Council's nationalist leader, said he hoped the plan would lead to a national debate on new ways of giving Scottish schools and headteachers greater freedom over their finances.
The proposals – part of a wider budget review – were immediately condemned by the Labour Party in Scotland but backed by both the Conservatives and headteachers.
The controversial move by the SNP/Liberal Democrat controlled council was revealed as a report, published today, showed Scotland continues to lag behind England.
Policy thinktank Reform Scotland claimed that exam performance has remained static in Scotland despite vastly increasing investment since devolution.
The educational trusts, which would be the first in Scotland, are proposed in a document endorsed by East Lothian's SNP/Liberal Democrat coalition, You Pay, Have Your Say: Spending Choices. East Lothian Council Budget 2010-13, is described as a "community consultation paper".
Trust schools, which are supported by the Labour government at Westminster, have proved popular in England, with hundreds of schools already taking up the status.
South of the Border, such schools are funded by councils, but run by governing bodies which can employ their own staff, make separate admissions arrangements and manage their own assets. Governors of trust schools can include representatives from private business.
Mr Berry described the proposal as "serious". He said: "The idea is to look at school clusters – high schools and their associated primaries – to form trusts, and give them more freedom to spend money as they see fit to serve their communities."
Councillor Berry said it was very difficult for schools to be flexible currently because of the way budgets were allocated.
He said more flexibility could allow, for example, a school to reduce subsidised bus travel for pupils and use the money instead to bring in a specialist Mandarin teacher.
He also suggested a school with a strong sporting background might want to spend more on buses to rugby matches – while another might decide to spend more on arts and crafts materials.
Councillor Berry stressed an agreement would be drawn up between a trust and the council, which would still fund the educational trust.
He said the idea was in the early stages but was the sort of radical plan the local authority wanted to look at.
He added: "The financial situation is very serious and we need to explore every avenue to provide services to people without needing to borrow money – and that means doing some fairly unconventional things."
Councillor Berry said he could not rule out private businesses joining the governing bodies – and that the English model would be looked at if the council decided to take the proposal forward.
Mr Berry continued: "Scots are defensive about their state school system, which is right, and it's not an option we would digress from without good reason.
"But the financial situation is serious and we need to explore every avenue to provide services to people without needing to borrow – and we will have to do some fairly unconventional things.
"Local schools are an important institution in the history of schooling in Scotland and there is an embedded public service element which is not quite so relevant in England."
The East Lothian proposal has sparked political controversy, with Scottish Labour leader Iain Gray, MSP for East Lothian, dismissing it as out of step with the public mood.
The section of the East Lothian document on trust schools says: "There may be benefits in establishing educational trusts to deliver education on behalf of local communities. Such trusts may access additional funding from other sources and may also benefit from not having to pay rates."
East Lothian's move comes just weeks after leading education academic Lindsay Paterson, professor in educational policy at Edinburgh University, said it was a "myth" that Scotland's schools were best in the UK.
And he suggested Scotland had much to learn from the greater diversity of schools in England.
Another academic who recently studied headteacher recruitment admitted some local authorities' advice to schools was being "slowly eroded in favour of mandated standards".
Writing in today's Scotsman, Professor John MacBeath, said: "While unremitting change is a constant, it is less the imperative of change that saps energy and enthusiasm than change driven by external sources, undermining latitude and discretion for heads to exercise the leadership talents for which they were recruited."
A spokesman for Mr Gray, said he was not impressed by the idea of trust schools in his East Lothian constituency.
He said: "(Mr Gray] feels that most people in Scotland and East Lothian would like local authorities to run their schools, and that there is no real need for further devolving budgets or setting up trust schools.
"The English set-up is quite different and there is already much more diverse provision in the state sector."
Ken Cunningham, general secretary of headteachers' union, School Leaders Scotland, said the idea was worth exploring. He said: "The world in which we now inhabit in terms of finance means that we have got to get a bit more imaginative about how we manage schools."
"Currently it is very difficult financially to meet all the demand which are being placed on schools."
He welcomed more autonomy for headteachers: "The more autonomy a school has within its local community the easier it is for headteachers, along with their colleagues in school and parents, to take local decisions based on local needs."
Liz Smith, the Conservatives' schools spokeswoman, also backed the proposal as she said headteachers too often found their hands tied by local authorities. "Our policy is one of independent schools within the state sector – in other words the money follows the child.
"Private (financial] inputs are perfectly acceptable but that should not in any way undermine state education which is what the tax payers are paying for. It is very important that remains the basis of the school.
"Headteachers are the ones in the front line and they know best how to run their school."
A Scottish Government spokesperson said: "Any decision over the funding and management of an individual state school would be a matter for the relevant local authority. Ministers have not been approached on the issue of trust schools."
HOW THE DIFFERENT MODELS WORK:JORDANHILL SCHOOLFUNDING: Currently the only state-funded school in Scotland which is outwith local authority control. The Glasgow school receives a grant directly from the Scottish Government and a board of governors decides how it is spent.
FREEDOM: The board of governors and headteacher have control over the school's provision and budget.
PROVISION: It is a small school which means experimentation with new qualification would still be difficult financially as the money is allocated on a per- pupil basis. It offers a similar syllabus to other state schools in Scotland.
EAST LOTHIAN MODELFUNDING: Based on English model but would also allow schools such as Musselburgh Academy to became part of a cluster which would allow it to share resources, meaning money saved from each having their own bus service for example, could be used to pay for a shared Mandarin teacher.
FREEDOM: Headteachers and the school community would have greater autonomy over their budget, meaning they can prioritise money for key local needs.
PROVISION: Scotland does not have a statutory curriculum so teachers would still be free to teach what they choose within an assessment and exam framework. However, innovation on introducing new qualification such as the International Baccalaureate would probably remain a local authority decision.
CURRENT STATE SCHOOLFUNDING: Comes directly from the local authority and is calculated on a per pupil basis. Council decides how money is spent centrally.
FREEDOM: Very little. Local authorities have ultimate and overall control over state schools, such as Boroughmuir High in Edinburgh, what they spend money on and what provision is offered.
PROVISION: Scotland does not have a statutory curriculum so headteachers and teachers do have control over what topics are taught in the classroom. However, much is set down by the local authority which retains final say on what qualifications are offered.
TRUST SCHOOLFUNDING: In England many schools have already set up as charitable trusts and have received financial support from private enterprise or education bodies such as universities. Ultimately they remain in local authority control and main funding would come from that source.
FREEDOM: Working together with other trust schools and private partners allows for greater scope to innovate educationally. Proponents say this raises standards.
PROVISION: As an example South Craven School in North Yorkshire has become a technology and engineering specialist, with the help of its partners which include Bradford University and Leeds Trinity University College.
More on the proposals: Scots pupils are falling behind English, says think-tank report Commentary: 'A flawed and inaccurate report'