Up to 600,000 extra school places would be created to give parents in England more choice under new Tory plans.
Mr Howard wants more choice for parents and pupils
Independent schools would be able to get state funding if they meet government prices as the Tories try to use competition to drive up quality.
The plans would give every school grant-maintained status, making them able to control their own budgets and choose to select pupils by ability.
"Failing" schools would also face new deadlines to improve or be closed.
The education "Right to Choose" package is the latest Conservative policy to be launched as the party tries to take on Labour over public services in the run-up to the next election.
Labour will offer its own choice agenda when it publishes its five-year education plan next week.
Unveiling his party's plans, Tory leader Michael Howard said: "Parents in Britain today simply have to shut up and take what they're given.
"I want to give every parent the kind of choice in education that today only money can buy."
Boosting the surplus
Calling for good schools to be freed from the "strait-jacket" of central control, Mr Howard said Tory policy would be based on: parents' right to choose a school; giving teachers real freedom; and opening up education to new providers.
There are already more school places than there are pupils but the Tories want to raise the surplus further by creating 550,000-600,000 extra places.
Tory shadow education secretary Tim Collins said there would be up-front money for existing schools to expand or for creating new schools.
Mr Collins wants to free schools from the control of "bureaucrats"
Planning rules would be also be changed to make school building easier.
The changes could mean 100,000 more parents would get their first choice of school over the space of a Parliament, said Mr Collins.
Independent or charitable organisations would be able to get state funding if they charged the same amount as state schools for all their pupils.
But parents would not be able to use state money as a top-up for fees at private schools charging more than the state price, which would be around £5,500 per pupil each year.
That marks a change from healthcare, where the Tories would offer subsidies for private treatment.
The party also plans to consult over faith schools. It says there is demand but it has to be "sensitive to having an integrated society".
The Tories have dropped its plans for "pupil passports", saying the idea was too complicated. Instead, state money would automatically go to the chosen school.
Mr Collins and Mr Howard hope their plans will win them votes
The policy is bolstered by a promise to raise schools funding by £62bn by 2009/10. Labour has so far said it will spend £47bn on schools in 2005/6 and £77bn on education overall by 2007/8.
All schools, not just the best, should be given new freedoms, including the final say on whether a pupil should be expelled, says Mr Collins.
Governors would also able to decide whether they want to select pupils by ability and would be able to set catchment areas.
Mr Collins said he did not expect the change to produce a dramatic increase in grammar schools.
The Tories have also decided not to abolish local education authorities, one of whose responsibilities would be to ensure every pupil could go to a school reasonably close to their home.
The plans to increase choice are coupled with a new approach to schools which fail Ofsted inspections or hit financial problems.
A "failing" school would have nine to 12 months to start improving before a new head teacher and governors was put in place.
If after that change the school still failed to turn itself around during the next nine to 12 months, it would be closed.
The party has yet to publish its plans for higher education, saying those will come at a later date.
Labour Education Secretary Charles Clarke said the plans would introduce selection for both primary and secondary schools.
That was ludicrous, he said, suggesting the package could net private schools up to £1.5bn.
"It's not about choice, it's about subsidy and division in our education," Mr Clarke told BBC News 24.
Liberal Democrat education spokesman Phil Willis said returning to selective schools would mean choice for schools but chaos for parents.
"Parents want a good local school, where their child feels safe," said Mr Willis. "Under the Tories that 'choice' isn't on offer."
He said there would be 300,000 surplus places in primary schools by 2012 in any case.