The article considers the change in power that will result from the Education Reform Act 1988. It is argued that as a result of two features in particular (Local Management of Schools and the National Curriculum) a three‐level hierarchy (DES‐LEA‐School) stands to be replaced by a two‐level hierarchy (DES and School). The implications of LEAs ceasing to be line managers in the system are considered; the sanctions they have been offered are too Draconian (suspending a school′s devolved powers, for example), to represent a policy execution tool. The performance indicators currently being devised by LEAs are criticised because they come too late when a school′s performance will be determined by its ability to attract and retain pupils. LEAs will have no alternative but to pass most resources on to schools according to a pupil‐based formula. It is the consumers who will determine the performance indicators of a school.
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