"While schools are being forced to compete with each other to bid for limited public funds, private money seems to be seeping in to fill the gaps through a variety of schemes," said David Gordon, chair of the Campaign for State Education (Case), which has organised a one-day conference on the subject.

Under the title Beggars, Choosers and Losers, the conference, at the University of London Union, looks at the way the private sector is being encouraged to become involved in various aspects of state education - and the implications this has for funding.

The Private Finance Initiative has been used to provide capital spending to build hospitals. Now it is being brought in to finance the rebuilding and replacement of dilapidated schools.

'Strings'

But Case says that with the Chancellor reportedly sitting on reserves of billions of pounds, many are questioning whether this is the right way to invest in the country's infrastructure.

Many schools suffer from poor design

"People are getting increasingly concerned that this private investment comes with strings attached," Mr Gordon said.

"It poses serious questions over accountability and ultimately questions the government's commitment to a publicly-funded state education system."

Among the speakers is Helen Williams, director of the school organisation and funding section at the Department for Education.

Governors and headteachers will talk about their experience of private sector involvement through education action zones, PFI projects and, in the case of King's Manor School in Guildford, the private takeover of the school's management.

Time-consuming

The first state secondary school in Britain built with private capital opened last month.

Sir John Colfox Comprehensive in Bridport, Dorset, was built under a Private Finance Initiative contract between Dorset County Council and construction and facilities-management company Jarvis.

The overall cost is £22.2m over the 30-year life of the contract, during which Jarvis will run catering, cleaning and maintenance, and information technology services, and replace obsolete equipment.

Dorset's head of finance, Paul Kent, is an enthusiast for the initiative, although it was a steep learning curve.

"The process of getting the right people is quite a long one and we found it time-consuming," he said.

'Worthwhile'

There were 50 expressions of interest from 12 consortia, whittled down to a shortlist of four.

An outside consultancy was used, and there was financial help from the government because theirs was a pilot project in education. It cost more than £200,000, plus probably as much again in council officers' time.

"Having said all of that we got a very worthwhile project," Mr Kent said.

Dorset pays a fixed amount each year, part of it index-linked. Jarvis is responsible for maintaining the school and putting right anything that goes wrong.

Earlier this month, the education secretary approved the proposal to give a state secondary school in Guildford a 'fresh start' - being run by a private company.

The school, Kings' Manor, is to reopen next September as Kings' College for the Arts & Technology, run by 3E's Enterprises, the commercial subsidiary of Solihull-based Kingshurst City Technology College.