Derelict hospital buildings, vacant banks and boarded-up shops could soon be transformed into classrooms, as the government prepares to scrap planning restrictions so parents can set up “free schools”.

Michael Gove, education secretary, on Friday launched a streamlined application process for budding education entrepreneurs, promising to strip away layers of “ridiculous, bureaucratic nonsense”.

“We don’t need to have the degree of prescription that has governed school buildings for so long,” he said. “It has been a tragedy that so much money has been swallowed up by bureaucracy.”

Mr Gove said that around 720 groups of parents, teachers and charities had already expressed interest in establishing new schools, which would be given the freedoms enjoyed by semi-independent, state-funded academies.

The flagship Tory education policy, based on the free school model in Sweden and US charter schools, aims to trigger a supply side revolution, so that school places better match demands of parents.

At present, places are controlled by local authorities, which the Tories say smothers competition. Mr Gove said Britain had “one of the most segregated, stratified school systems in the developed world”.

Labour and education unions attack the plans as a costly experiment that will benefit middle-class parents at the expense of weaker schools and the poor.

Ed Balls, shadow education secretary, said he feared the changes would be “unfair” and “paid for by a less good education and fewer teachers for all the other schools in the country.”

Almost all of the early batch of “free schools” are likely to be high-performing existing schools that decide to take up the new right to opt out of local authority control.

No new schools set up by parents or charities – the most high-profile aspect of the Tory reforms – are likely to open until at least September 2011, a time-lag that the Tories fear will prompt criticism of their reforms moving too slowly.

A key part of the education bill will be revamping the planning rules to permit the re-designation of commercial and residential properties for use as a school. Mr Gove will set aside £50m for start-up costs but admitted that the new school founders would need to use some “imagination” on space.

The big test will be whether they enable parents to set up new schools in inner-city areas, where property prices are high and fewer suitable sites are available. The added complication is that these urban areas are often those where the demand for new schools is high.

Those seeking advice on establishing a school are being directed by the government to the New Schools Network run by Rachel Wolf, a former adviser to Mr Gove.

Most parents will be put in touch with education providers, many of whom have experience of running academies. Some profit-making groups could work with school governors to administer the school.

As part of a formal application process, the prospective school governors will be asked to submit a “vision” for the new school, identify a potential venue and name the organisation they would be working with. The second stage will require a full business plan to prove the venture is financially viable.

Half the expressions of interest to date have come from teachers in deprived areas, while others are from faith groups and parents frustrated by the lack of schools in their local areas.

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