Throughout the coalition government's first year, its plans for the NHS have attracted more controversy and opposition than any other policy. But Andrew Lansley, the Health Secretary, is not the only minister aiming to turn an entire public service upside down. Michael Gove, the Education Secretary, has his own grand scheme, which has attracted only spasmodic attention.

Private providers licking their lips at the pros­pect of taking over services? Check. Proposals to intensify competition between providers? Check. Fears that a unified service will suffer fragmentation? Check. Suspicion that services will be run for profit, not for their users? Check. Warnings that we are heading for a two-tier system in which the poor get a bog-standard service while privileged families are offered a streamlined alternative? Check.

If opposition to Gove's plans has been relatively muted, it is largely because Labour has failed to highlight how far-reaching they are. Many former New Labour ministers and advisers, notably Lord (Andrew) Adonis, who was a schools minister from 2005-2008, have welcomed them enthusiastically. As Gove would acknowledge, his vision for our schools has a degree of continuity with the policies of previous administrations, both Conservative and Labour. At their heart lies a project that central government has quietly pursued for nearly 25 years: the removal of English education from the control of local councils.

Under Gove, this project will take a giant step forward. Most attention has focused on his "free schools" policy, which allows parents, teachers and voluntary groups to set up new schools with public money. But only 40 such schools are in the pipeline, most will recruit just a few hundred pupils, and it is likely no more than four will open this September. They are an engaging sideshow, enlivened by the plans of the journalist Toby Young - a self-confessed "professional failure" - to redeem his life by setting up a free school in west London, and given added political interest by the attempt of Peter Hyman, a former Blair speechwriter, to set up a school in east London.

Gove's expansion of academies is of far greater significance. Like free schools, academies are independent of local authorities and allowed to waive the National Curriculum. They can set their own admissions policies, albeit within a national code that prohibits outright selection. Most crucially, they receive money that would otherwise be held by the local authority for support services, such as special needs and English language tuition, and they are free to spend it as they wish.

Under Labour, academies were concentrated in urban areas and intended, with the help of private sponsorship, to replace "failed" schools operating with disadvantaged pupils in difficult circumstances. Gove has turned that policy on its head. He has invited "successful" schools to apply for academy status, arguing that they can be trusted to use the academies' freedoms wisely and to flourish even more if released from council bureaucracy. Several hundred secondary schools and a small proportion of primary schools have already switched. In 27 out of 152 English local authority areas, academies now account for the majority of secondary schools; within a year, they will constitute nearly a third of the total nationwide.

The new academies are overwhelmingly in suburban and rural districts. For most schools in these areas, where disadvantaged children are less numerous than in the inner cities, academy status is a no-brainer. It signals a school's success, making it more attractive to parents, and brings a funding increase of up to 10 per cent while public spending is being squeezed.

That money previously went to the council's central services, and if the school continues using these, it will have to pay. But "successful" schools have less need of such services than other schools, which usually teach more children whose mother tongue is not English, or who have behavioural or learning problems. Academies will mostly buy in "bargain-basement" services from private providers. Local authorities will have greatly diminished budgets for services to schools with the biggest problems. Resources will have been stealthily redistributed - from the deprived to the more advantaged.

Meanwhile, Gove has given clear signals that academies will get favourable treatment. Having pulled the plug on Labour's £1bn Building Schools for the Future programme, he gave the go-ahead this month for £800m of building schemes for academies. A few days ago, he promised to allow "successful" schools (most of which are likely to be academies) to expand rapidly and stop local authorities restricting their admissions in order to protect "weaker" schools from closure.

Gove has an answer to claims that his policies will hit children from less affluent homes: the pupil premium, an extra £430 for each pupil eligible for free school meals. The Lib Dems insisted on the premium if they were to support Gove's grand design. They believe not only that it will channel resources to the most needy more effectively, but that it will give all schools an incentive to recruit disadvantaged children rather than cherry-picking those who are most likely to gain exam results that guarantee a high place in league tables. But the premium seems unlikely to achieve either goal. The £430 represents less than a 10 per cent uplift on what is spent on the average pupil. Moreover, schools will be free to spend the pupil premium as they wish. There is no guarantee it will reach the children who are supposed to benefit.

Gove stands accused of dealing a further blow to schools in deprived areas. He argues that, to boost their league table positions, which depend on the numbers achieving top grades, schools enter too many children for GCSEs in "soft" subjects. He has therefore introduced the English Baccalaureate, a curious echo of the "school certificate" abolished 60 years ago. Pupils will be awarded the EBac if they get grades A*-C in English, maths, two sciences and a modern foreign language.

Gove intends this to become the main benchmark for a successful secondary education, and argues that the EBac subjects are essential for entry to top universities. His critics reply that, if the certificate becomes as prestigious as he intends, schools will channel resources into those five subjects and neglect, for example, design and technology, media studies, citizenship, music, computer science and a host of vocational subjects that tend to attract the less academic and more disadvantaged. Barely one in eight pupils on free school meals - against nearly a third of other pupils - achieves grade A*-C in a foreign language.

Only 16 per cent of GCSE candidates currently achieve the level required for the EBac. In the academies that Gove claims to admire - the "old" ones, set up by Labour to raise standards in deprived areas - the figure is even lower. In nearly a third, not a single pupil achieved the EBac level last year. That was true for only 8 per cent of non-academy secondary schools.

Gove's support of "university technical colleges" for pupils aged 14 to 19 has received still less attention than his plans for academies, yet they could transform English education even more radically. The man behind them is Lord (Kenneth) Baker of Dorking, the creator, under Margaret Thatcher, of the National Curriculum, tests, league tables, city technology colleges (the first models for academies) and opportunities for schools to "free" themselves from local authority control.

Along with the late Sir Ron Dearing - the former Post Office chairman who became a ubiquitous chair of official committees under New Labour - Baker set up a trust to promote the colleges four years ago. He won support for them, initially from New Labour, but more wholeheartedly from the Conservatives. They will teach subjects that require practical skills and specialised equipment - engineering, product design, health sciences, construction, food technology - and reflect the requirements of local employers. The first college has already opened in Staffordshire (across the road from its sponsor, the machinery-maker JCB) and Baker has government funding to set up another 15 (£3m each). He expects to have 100 open by 2015 and as many as 300 by 2020. Baker presents the colleges as a solution to the perennial English problem of the low prestige of technical education, which is often blamed for industry's sluggish performance against Continental and Far Eastern rivals.

Like academies and free schools, the colleges will be non-selective; Baker says pupils will select themselves. But it is not hard to see how the scheme could develop and, when I talked to him earlier this year, Baker was surprisingly frank. Grammar schools became unpopular, he said, because the age at which children were selected, 11, was too early. If children changed schools at 14, "different pathways" would meet far less public resistance. He proposes four distinct types of school: technical, academic (in effect, grammar schools), vocational (he mentioned beauty, fashion and floristry) and artistic. The Tory dream of ditching comprehensives as we know them and restoring the grammar schools, albeit from 14, not 11, would thus be realised at last.

So the secondary school system - and, to a lesser extent, the primary school system - is being fragmented and comprehensives threatened as never before. In the scale of his ambitions, Gove bears comparison with Baker and R A Butler, architect of the Education Act 1944. For more than a century, local authorities have been the mainstay of English education. They lost control of most post-16 education in the 1990s. By 2015, they will almost certainly have lost control of secondary schools, with most state schools funded directly from Whitehall and deemed "independent". Primary schools may not be far behind.

It will be one of the greatest centralisations of power in English history. Do Gove's plans also open the way to large-scale privatisation? Right-wing think tanks, Times and Telegraph columnists and Tory backbenchers, including the chairman of education select committee, are all pressing Gove to allow for-profit providers to run academies and free schools. The Swedish models for the latter, they point out, could never have got off the ground without profit-making being allowed. Gove insists that schools should not be run for profit.

This debate is irrelevant. Private corporations already make profits from taxpayer-funded schools. The "educational services industry" is worth at least £2bn. As Stephen Ball, a professor at London University's Institute of Education and the author of Education plc, puts it, private-sector concerns - some profit-making, some not - have become "embedded in the heart and sinews of state education" over the past 20 years. They carry out school inspections, run government projects, provide careers advice for school leavers, supply teachers who cover for staff absences. The non-profits (which often behave much as profit-making companies do, not least in the salaries and expenses they pay senior executives) already own and run schools. E-Act has 11 academies and proposes, within five years, to scale up to 250 state-funded schools, which would make it larger than all but 16 local education authorities.

Though the profit-makers are barred from directly owning state-funded schools, they can sign contracts to manage particular services, such as school finance, or even to operate whole schools and education authorities. Many governing bodies that opt for academy status - and most groups that launch free schools - will not possess the expertise to run a school. Most will delegate to a private company.

Talk to any business that supplies services to the public sector and its executives will enthuse about how free schools and academies present an opportunity to build school "chains", with the advantages of nationally recognised brands as well as economies of scale. Swedish companies, such as IES, which runs 23 state-funded schools in Sweden, are already trying to establish themselves in the British market. If they are successful, parents may one day look for IES schools as they look for Ikea furniture or M&S pants. And if the market rules in education, the results are likely to be similar to those in other sectors: small providers, such as Toby Young's free school, which has opted for a DIY operation, will be driven out of business. As Professor Ball points out, when the Tories privatised school inspections in the 1990s, 120 providers entered the market. Now there are just three.

All this might be tolerable if, as Gove argues, competition and more private provision delivered better value for money and higher standards. But the evidence is far from conclusive. Between 1995 and 2007 - the period in which free schools expanded in Sweden - that country's scores in international maths and science tests fell by 48 per cent and 42 per cent, respectively, while England's rose by 16 per cent and 8 per cent. An authoritative study of US charter schools, another Gove model, concluded that, in 37 per cent of the schools, pupils made significantly less progress than their equivalents in normal public schools. In only 17 per cent did they make significantly more. In England, researchers found that GCSE performance in academies is "statistically indistinguishable" from that in other schools with similar intakes.

In short, the private sector has no "magic bullet" for education. Nor is it clear that English schools need revolutionary change. They do better than schools in the US, Australia, New Zealand and most other European countries, according to an analysis by McKinsey & Co. The latest British Social Attitudes survey shows that public ratings of secondary schools' effectiveness have risen sharply since 1997. Critics accuse Lansley of tearing apart a successful state service for purely ideological reasons. Whatever his protestations, Gove is open to the same charge.

Peter Wilby was editor of the New Statesman from 1998-2005