Banking group's £2m offer to fund academy was rejected

The financial institution had discussions with Tower Hamlets about the possibility of being involved with an academy.

But it is understood the talks, held in 2004, failed to get beyond the initial proposal stage.

The plan had the strong support of Goldman Sachs' chief economist Jim O'Neill, the Financial Times reported.

Academies are the Prime Minister's flagship policy for transforming state education in England's inner cities. Ministers want to open 400 in an effort to improve education in these deprived areas.

In exchange for up to £2 million, private sponsors such as business figures and faith groups take control over running an academy, including setting the school's ethos and appointing governors.

The Government pays for the school's running costs and the rest of the expense of opening new buildings - typically about £25 million.

Tower Hamlets Council said in a statement: "Tower Hamlets' approach to academies, as with any other school improvement or reorganisation opportunity, is to judge each proposal on its merits.

"Our 14-19 (year-old) action plan was approved by the DfES in 2005 and sets out an agenda for improvement based on strong collaboration among our secondary schools.

"Our priority is always to secure the best possible standards for our young people. This is not a place where the excuse of deprivation is allowed to stand in the way of high aspirations.

"Since 1997 the percentage of young people achieving five or more good GCSEs has increased from 26 per cent to 56 per cent, over double the rate of progress nationally.

"The strong established links between our schools and the business community have made an important contribution to this improvement."

A spokesman for Goldman Sachs said the group did not want to comment.