Prime Minister-in-waiting Gordon Brown has outlined plans to make education in Britain "world class", in order to meet the challenges of globalisation.
Mr Brown has said education will be his top priority
In his Mansion House speech to the City, Mr Brown said businesses should be involved in every school and backed England's city academies programme.
The chancellor pledged more focus on discipline, setting by ability and to review literacy and numeracy teaching.
He said there was "too much potential untapped, too much talent wasted".
In his 11th and final Mansion House address as chancellor, Mr Brown praised the City of London's success as an international financial centre.
Later, Bank of England governor Mervyn King paid tribute to Mr Brown's contribution to a "remarkable decade for the British economy".
The chancellor had said that if Britain was to meet the challenges of globalisation, improving education and skills had to be the priority.
There would be "no place in the new Britain we seek for complacency and no room for inadequate skills, low aspirations".
"I want a Britain where there is no cap on ambition, no ceiling on talent, no limit to where your potential will take you and how far you can rise," he added.
To achieve this he outlined plans to keep children in schools or training until 18, and offer them a "clear pathway" to a career - either through further education or through an apprenticeship.
A National Council for Education Excellence is being set up to bring together business, education and voluntary sector leaders, he said, to see how businesses and universities can help schools.
"In future every single secondary school and primary school should have a business partner - and I invite you all to participate," he said.
BBC political editor Nick Robinson said it appeared Mr Brown was "ploughing on in much the same direction as Tony Blair".
Setting by ability
Education policy in England would focus on "standards and rigour" in teaching - particularly literacy and numeracy.
There should be more "setting by ability" in maths, English, science and languages in all schools, he said.
While "setting" groups pupils in terms of ability for certain lessons only, "streaming", favoured by Conservative leader David Cameron, puts them in hierarchical groups for all lessons.
Plans for small group after-school tuition for pupils with a particular interest in certain subjects, extra support for gifted pupils and business "mentors" for those at risk of dropping out, were also outlined by Mr Brown.
Teachers 'in control'
And he pledged to champion "greater diversity" in education, adding he "applauded" city academies and wanted to make it easier to expand them.
He also said he would consider "employer led" skills academies to improve vocational provision.
The government would champion "excellence in teaching" and try to attract more "inspirational graduates" into teaching.
And Mr Brown added teachers had to be "in control in every classroom". Further steps would be taken to "stamp out" bullying and Ofsted would be asked to "raise the bar" on what is considered acceptable behaviour.
Mr Brown said: "We will champion discipline. I know parents and employers expect us to do more to help schools recognise the vital role of discipline in developing children and young people and they are right to do so."
Mr Cameron's camp accused the chancellor of seeking to create a "false debate" over setting in schools - insisting the Tory leader entirely supported expanding it.
Tory policy was to back setting in key subjects but to allow schools freedom to stream pupils in a group of other classes such as geography, a spokesman said.
Liberal Democrat education spokeswoman Sarah Teather called Mr Brown's comments "more platitudes" saying: "The challenge for the government is to do what it has failed to do in the last 10 years and break the link between poverty and underachievement."