The sudden demise of the Discovery New School is likely to undermine confidence in Education Secretary Michael Gove's flagship programme.
Parents and governors at the Discovery New School in Crawley have expressed their dismay after it became the first free school to be closed.
As many as two in three councils could see more children looking to start primary school in their area than there are currently places for.
The general secretary of the Association of Teachers and Lecturers Dr Mary Bousted has claimed the DfE has "overspent its free schools budget by £1bn".
– General secretary of the Association of Teachers and Lecturers, Dr Mary Bousted,
ATL believes that the cost of setting up these schools is diverting money that is desperately needed by existing schools - the DfE overspent its free schools budget by £1bn and has had to claw that money back from elsewhere in the education system.
We are concerned that more than 20% of free schools have been established in areas where there is no shortage of school places and, since they are not part of the local authorities' planning procedure, they make it difficult for parents to get their child into a local school of their choice.
A Department for Eduation spokesman said: "We have made an additional £5 billion of funding available in this Parliament alone to councils to create new school places - double the amount spent by the previous government over the same period. This is in addition to the budget for free schools."
The DfE said the latest approvals means there are now 331 open and approved free schools across the country, creating 175,000 school places.
– Natalie Evans, director of the New Schools Network
The popularity of free schools around the country shows no sign of abating - be that from groups wanting to set up new schools or from parents wanting to secure a place for their child.
Just as importantly, these schools are outperforming other state schools.
Free schools inspected so far were more than twice as likely to be judged 'outstanding' as other state schools.
Among the latest schools to be approved are the LIPA Sixth Form College, which is being established by the Liverpool Institute for Performing Arts, a specialist centre founded 18 years ago by Sir Paul McCartney, and The Powerlist Post 16 Leadership College in Lambeth, south London.
The Government has announced a further 38 new free schools have been approved to open. The majority are expected to open their doors in September 2015, with half due to be set up in the most deprived communities in England.
The 38 new schools will collectively offer 22,000 places.
Education Secretary Michael Gove insisted that free schools were giving children from "ordinary backgrounds" the type of education "previously reserved for the rich and the lucky".
He said: "Thanks to our free school programme, many more parents now have a new school in their neighbourhood offering high standards and tough discipline.
"Free schools put teachers - not bureaucrats and politicians - in the driving seat, as they are the ones who know their pupils best."
Under half of the UK's new free schools have submitted their accounts for the tax year 2011/12 to the Education Funding Agency (EFA), an influential group of MPs has warned.
The Public Accounts Committee was particularly critical of the following:
- Al-Madinah School in Derby.
- Discovery New School in Crawley, West Sussex, which was closed down last month.
- Kings Science Academy in Bradford.
- They said that these cases suggest that the Department for Education (DfE) and EFA's processes for overseeing free schools "are not yet working effectively to ensure that public money is used for the proper purpose".
The Government has dismissed criticisms of its rollout of free schools, claiming a scathing report by MPs into recent scandals is "misplaced".
A Department for Education spokeswoman said:
– A Department for Education spokeswoman
As the PAC has recognised we have made significant progress in implementing free schools, which are driving up educational standards and giving pupils from all backgrounds the chance to achieve academic excellence.
Many of the PAC's concerns are misplaced. Free schools are subject to greater scrutiny than council-run schools, they are overwhelmingly located in areas with a shortage of places, and construction costs are 45% lower than the previous school building programmes.
Those areas with a shortage of places but with no free schools receive extra basic need funding to make up for it.
Recent scandals around the Government's flagship free schools have shown how the management standards are "not up to scratch", according to the Chairwoman of an influential committee of MPs.
Public Accounts Committee Chair Margaret Hodge, Labour MP for Barking, said:
– Margaret Hodge
Recent high-profile failures at Al-Madinah School and Kings Science Academy demonstrate the DfE and the EFA's oversight arrangements for free schools are not yet working effectively to ensure public money is used properly.
The department and agency have set up an approach to oversight which emphasises schools' autonomy, but standards of financial management and governance in some free schools are clearly not up to scratch.
The agency relies on high levels of compliance by schools, yet fewer than half of free schools submitted their required financial returns for 2011-12 to the agency on time.
Poor financial management and bad governance are dragging down some free schools and leaving the Government to be overly reliant on whistleblowers to raise problems, an influential group of MPs has warned.
The Public Accounts Committee raised concerns the Government did not have a clear idea of where taxpayers' money was being spent on the flagship policy.
There were also concerns over the lack of bids to open primary free schools in areas where more places for youngsters were desperately needed.
The report analyses the success and value for money of the free schools programme and says that the Government has made "clear progress" on the scheme - which is a key part of its education policy - by opening new schools quickly.
But it adds that the measures put in place for checking how these schools are run and whether money is being spent properly are not good enough.
A Government free school which allegedly saw pupils "taught nothing" for a term will today be used as an example of a failing in Education Secretary's Michael Gove's landmark project.
The annual conference of the National Association of Head Teachers (NAHT) in Birmingham will today hear evidence that, after a term at the school, pupils were "precisely one term behind where they should have been".
Russell Hobby, the general secretary of the NAHT, will cite Discovery New School in Crawley, West Sussex, as an example of "the dangers of poorly thought through policy, rushed in to be able to claim a result".
The school was closed last month after Ofsted inspectors said its teaching left pupils "in danger of leaving school without being able to read and write properly".
A spokesperson for the Department for Education said action had been taken to close Discovery New School because standards were "simply not good enough" but added: "There are more than 170 free schools around the country and the vast majority are performing well."
Pupils at a free school that was closed down last month had been "taught nothing", a union leader has said.
Russell Hobby, general secretary of the National Association of Head Teachers (NAHT), claims that some youngsters from Discovery New School, in West Sussex, were a term behind where they should have been when the school was closed over serious concerns about standards.
In his speech to the NAHT's annual conference in Birmingham, Mr Hobby is expected to say: "Some free schools are performing highly and, to be fair, few schools could have lived up to the hype attached to them, but some people were given schools to run who should not have been allowed near them."
The six-week school summer break should be scrapped in favour of spreading holidays more evenly throughout the year, headteachers have suggested.
The move is being considered by the NAHT (National Association of Head Teachers) in a bid to reduce the cost of holidays during August and prevent teachers from being exhausted at the end of term.
The union is considering the proposal as part of a new education manifesto it is drawing up at its annual conference this weekend ahead of next year's general election.