Schools are to get new freedoms amid a major reform of local councils' power over education, Tony Blair has said.
Tony Blair is promising "freedom for all" under Labour's five-year plan
Speaking ahead of the government's five year education plans, Mr Blair signalled that schools would get freedom over their budgets.
Local education authorities (LEAs) would become a "champion of the parents", ensuring choice and quality.
The prime minister said Labour's goal had to be ensuring schools excellence for all children, not just a few.
Earlier, Mr Blair was attacked by Tory leader Michael Howard on the numbers of 11-year-olds who cannot read or add up.
In the Commons, the prime minister countered that Labour was putting right the "scandal" of children leaving primary schools without the required level of English and maths.
Earlier, the Department for Education and Skills declined to comment on a report in The Times newspaper suggesting LEAs are to lose their role in funding schools.
The report claims LEAs will have only a minor advisory role acting as a "postman" for Whitehall money.
Currently they decide how much goes to schools and how much to retain for administration and support services.
In his speech to the Fabian Society, Mr Blair said the reformed LEAs would still have strategic responsibilities.
His concern was not that they would be too weak but that they would not be bold enough in tackling failure and promoting change in response to parental demand.
"There is no contradiction between schools managing themselves independently, with complete budgetary security and freedom to do so as effectively as possible, as we will propose, and a continuing important role for local education authorities."
With both Labour and the Tories emphasising choice in education, Mr Blair was keen to define the dividing lines.
There would be no return to the 11-plus for secondary schools, nor would there be selection for primary schools as the Tory plans would allow.
"It will be freedom for all schools to succeed for all - not a free-for-all," he said.
Mr Blair, who wants to keep middle-class parents within the state sector, also ruled out subsidies for private schools.
He said the ambition was to "shift from good to excellent in the quality of education offered to the great majority of young people in this country".
The education plans are also expected to offer successful secondary schools in England more independence.
They could get "foundation" status, like top-performing hospitals, and be able to decide pay levels for staff and raise funds for new buildings.
Some teaching unions warn the plans could create a two-tier system, with schools in middle class areas better placed to raise cash from parents.
But Mr Blair said he found the charge that Labour was introducing elitism "incomprehensible".
There would be plans for expanding the number of places at popular schools, as well as help for failing schools.
Incoming Local Government Association chairman Sir Sandy Bruce-Lockhart said local councils had not been informed of any plans to limit the role of LEAs.
But it was central government that needed to loosen its grip on schools, not local councils, he insisted.
Conservative shadow education secretary Tim Collins questioned whether Labour was going to be any different from its first seven years in power.
"Mr Blair says he's going to set schools free, he says he's going to scrap red tape for teachers, but his government does exactly the opposite," said Mr Collins.
And Liberal Democrat leader Charles Kennedy warned: "What people actually want in this country is high quality local state schools - what they don't want is a Labour government trying to outbid the Tories when it come to selection."
Meanwhile, a committee of MPs has said the government's plans for limiting school transport are likely to limit school choices for low income families.
Under the proposals, children will be taken for free to their nearest school but parents will have to pay for transport to schools that are further away.