The Government has announced plans to remove a cap on new faith-based free schools which currently stops them from selecting more than half of pupils on the grounds of religion.

Ministers hope that lifting the cap on faith-based admissions, which applies to new faith free schools in England, will create more school places for pupils.

But campaigners and education union leaders said going ahead with the plans would be a “retrograde step” and “wrongheaded” as they argued that more faith schools will exacerbate “discrimination, division and disadvantage”.

The Department for Education (DfE) will launch a consultation on removing the 50% cap on Wednesday, alongside proposals to create faith-based academies for children with special educational needs and disabilities (Send).

Under the current rules, a new free school with religious character must allocate at least 50% of its places to pupils without reference to their faith if they are oversubscribed.

The Catholic Education Service has previously argued that the rule effectively banned the opening of any new Catholic free schools as turning away Catholic pupils would be against canon law.

But if the cap is removed, oversubscribed faith-based free schools will be able to select up to 100% of their intake based on pupils’ religious belief.

Education Secretary Gillian Keegan, who attended a Catholic school, said she had seen first-hand how values and standards in faith schools “often give young people a brilliant start in life”.

She said: “Faith groups run some of the best schools in the country, including in some of the most disadvantaged areas, and it’s absolutely right we support them to unleash that potential even further – including through the creation of the first ever faith academies for children with special educational needs.”

It is understood that existing faith-based free schools – which currently have to adhere to the 50% rule if oversubscribed – will be able to apply to have the cap lifted if the Government’s plans are given the green light.

The consultation, being held by the DfE, will also explore how to improve provision for Send children by opening special faith academies.

It is currently not possible for special schools to open as academies and be designated with faith status, the DfE said.

Andrew Copson, chief executive of Humanists UK, said: “The proposal to allow 100% religious discrimination in new state faith schools will increase religious and racial segregation in our schools at a time when integration and cohesion has never been more important.

“It will further disadvantage poorer families, non-religious families, and families of the ‘wrong’ religion.”

Stephen Evans, chief executive of the National Secular Society (NSS), said lifting the cap would only “exacerbate the discrimination, division, and disadvantage that faith based education encourages”.

He said: “Allowing new faith academies to apply 100% religious selection would be entirely wrongheaded and run contrary to values that should be at the heart of our society.”

Simon Barrow, chair of the Accord Coalition – the alliance of religious and non-religious groups and voices working for fully inclusive education, added that scrapping the cap would be “an enormously retrograde step”.

The vast majority of faith schools in England are Christian – mostly Church of England (CofE) or Roman Catholic, but there are also a small number of Jewish, Muslim, Hindu, or Sikh schools.

The Right Reverend Marcus Stock, Bishop of Leeds and chairman of the Catholic Education Service (CES), said: “These proposals are welcome. Dioceses are well placed to respond to differing local educational demands around the country, including the provision for children with special educational needs and disabilities. Parents can welcome this also.”

He added that Catholic education “provides a high performing school sector and promotes the formation of children in values and virtues”.

Nigel Genders, chief education officer of the CofE, said: “This broad package is good news because it will mean more people can benefit from the education provided by Church of England schools which is so highly valued by parents and children and young people.

“By enabling Church of England special schools, we can serve the needs of more children in more communities, irrespective of their faith background.”

Replacing the 50% rule for faith-based free schools was originally suggested in September 2016 when the Government launched a consultation on expanding the number of good school places available.

The Conservatives then set out a commitment to “replace the unfair and ineffective inclusivity rules” that prevent the establishment of new Catholic schools in their 2017 manifesto.

But in May 2018, the Government decided to retain the 50% cap on religious-based admissions to new free schools.

Instead, it announced a capital scheme to support the creation of new voluntary aided (VA) schools – which are run with local council involvement and can be 100% selective on pupils’ religion.

Paul Whiteman, general secretary of the NAHT school leaders’ union, said it was worried that removing the cap is “an unnecessary and potentially retrograde step.”

He said: “We are concerned that there is a danger that such a move could inadvertently lead to a sense of selection through the back door and could potentially make it harder for some pupils to get a place at their local school.

“Such a change in policy feels inappropriate so close to an election and is something that should be incorporated into a manifesto.”

Pepe Di’Iasio, general secretary of the Association of School and College Leaders (ASCL), added it has seen no evidence that scrapping the 50% cap would be “of social or educational benefit”.

Sir Edward Leigh, former president of the Catholic Union and Tory MP for Gainsborough, called for the cap to be removed before the upcoming general election as he said it would make a “big difference” to the Catholic community.

He said: “This is a great victory for Catholic education and common sense.

“For years, we have been trying to make ministers see sense on this and allow Catholic free schools to open.”