The government has gone back on its manifesto promise to remove the cap on faith-based free schools which stops them allocating more than 50 per cent of their places on the grounds of religion.

Instead it says it will provide more funds for local councils to open more 'voluntary-aided' faith schools, which will be allowed to recruit all their pupils from particular faith groups.

The cap for religious free schools – which are not controlled by local authorities – has been controversial because it means children of the faith for whom it was set up might not get a place. However, its defenders argue it is a protection against children being educated in an entirely sectarian environment in which they do not mix with pupils of different backgrounds.

In an interview with BBC Radio 4's Today programme education secretary Damian Hinds said: 'We reflected long and hard on these difficult issues...we have concluded that it is right that we continue to have that cap.'

The Department for Education said: 'There are many good or outstanding faith schools and more want to open. The Government will retain the 50 per cent cap on faith admissions for free schools but will develop a scheme to help create new voluntary-aided (VA) schools for faith and other providers to meet local demand, supported by capital funding. The VA route already allows for schools to apply to open with up to 100 per cent faith based admissions.'

Jonathan Arkush, president of the Board of Deputies of British Jews, said: 'We welcome the government's commitment to facilitating the opening of more faith schools, including Jewish schools, through designated funding provided to local authorities. The popularity of faith schools with parents reflects their academic results, ethos, behavioural standards and the contribution that their pupils go on to make in wider society. It is no accident that one in every three schools in Britain is a faith school.

'However, we are disappointed that the Government has gone back on a manifesto commitment to drop the 50 per cent cap on faith-based admissions for new free schools of a religious character. Whatever the intentions behind it, and while the cap does have some supporters in our own community, the 50 per cent cap has not been proven to promote cohesion in practice.'

The Church of England's chief education officer, Rev Nigel Genders, said: 'The Church of England has a bold vision for education that is deeply Christian, serving the common good. We provide schools that enable all children to flourish and demand for places continues to be high.

'We want to develop new schools so more families can access this excellent education and our commitment when we do so remains to serve the local community, with the majority of places being allocated irrespective of faith background.

'Today's announcement about the faith cap does not impact on that commitment.

'As well as embracing the opportunities of academies and free schools, we have a strong track record of providing around seventeen hundred VA schools and welcome the opportunity to consider developing more of them.'