The state should "back off" and allow charities, parents and private groups to run schools, Liberal Democrat leader Nick Clegg is set to say.
A GCSE pass at grade G can be earned with just a 20% mark
In his first major speech in charge, Mr Clegg will suggest creating so-called Free Schools under local government oversight, but not council controlled.
These "new, liberal" schools would also be non-selective, he will say.
The Lib Dems also say they would scrap the bottom two GCSE grades as they have "no value" in the labour market.
"It is time to call a fail a fail and raise expectations" by abolishing the lowest pass grades, G and F, Mr Clegg will say.
His speech on Saturday at a conference in London to discuss ideas for the party's manifesto will be his first since becoming leader in December.
Mr Clegg, who says his ideas apply equally to the running of hospitals, wants local authorities to have responsibility for allocating money fairly and for ensuring equal access and good standards.
After that, he will say, government should step back and "allow the genius of grassroots innovation" to take over.
Free Schools could be set up by a range of groups, Mr Clegg will say.
"They could be established by any suitable sponsor, including parents, educational charities, voluntary and private organisations with the right credentials."
Mr Clegg will insist it is "wrong" for the government to dictate exactly how schools run their business.
"Government should step away from daily management, and instead make sure that public services are held clearly to account through effective, independent systems of inspection," he will say.
In the future, Mr Clegg wants to see minimum education standards monitored by a new Educational Standards Authority formed of Ofsted and exams watchdog, the QCA.
He will argue that there is nothing wrong with Gordon Brown's target of having no schools where less than 30% of pupils achieve five good GCSEs - except that it is too low.
And he will say that it should not be acceptable for the lowest grades, G and F, to count as GCSE passes.
"The government reports as 'passes' some grades which we know are in reality of no value in today's labour market.
"What value exactly should an employer place on a G or F grade?
"You can get a G, in some cases, for a mark of about 20%.
"It's time to call a fail a fail. And raise expectations by abolishing the two lowest pass grades for GCSEs," he will add.
A spokeswoman for the Qualifications and Curriculum Authority said: "GCSEs are designed to recognise the achievements of young people with a wide range of abilities.
"By awarding grades from A* to G, the GCSE gives learners, parents, teachers and employers a clear understanding of attainment across the achievement range."
Mr Clegg will also criticise the policy which allows many state-funded schools to select up 10% by aptitude for a particular subject.
For example, specialist music colleges can select pupils a proportion of pupils who have a particular music talent.
Some critics say this can be a way of covertly selecting pupils who have the sort of parents that can afford to put them through music lessons.
On the future of the NHS, Mr Clegg will say that patients should be given their own health budgets to spend on treatment for long-term and chronic conditions like mental illness.