The government has been urged to allow free schools to open in areas where there is a “social need” for the integration of segregated communities.

Currently free schools can be set up where there is either a need for more pupil places or an “education need” – where there are several schools with “poor standards” in an area.

But the New Schools Network – a group that supports new school founders  – is now calling for a third category to be established around social need.

It would allow multi-faith or non-denominational schools to open more easily in areas with a lack of social mixing, the charity said.

Director Nick Timothy said it will help “bring our too-often divided communities together” giving an example of the multi-faith Collective Spirit Free School in Oldham, Greater Manchester.

The idea is one of three policy proposals put forward by the charity today to mend what the group claims are “fractured communities”.

The charity also called for a relaxation of rules that limit the ability of over-subscribed faith-based free schools to select pupils on the grounds of religion.

They also want to see more encouragement for multi-racial and multi-religious school chains.

Paul Barber, director of the Catholic Education Service (above left), seemingly welcomed the proposals. He said the organisation “remains open to the idea of free schools”, but said they can not take part because of the cap on faith-based admissions.

He added: “The cap prevents the church meeting demands from Catholic parents for Catholic places and could cause schools to turn Catholic families away on the grounds that they are Catholics. To do so contravenes not only Canon Law but also common sense.”

The New Schools Network said abandoning the cap would “increase the number of high-quality free schools groups”.

But Janet Downs, a campaigner for local schools, said faith schools “segregate pupils” – the opposite of what the charity is trying to achieve with its social need category.

“This undermines the claim that more free schools would encourage community cohesion.  The opposite is likely to be the case,” she added.

Mr Timothy urged the government to “consider these proposals while looking at more effective ways to ensure that schools take an inclusive approach.”

But a Department for Education spokesperson defended the status quo: “The requirement for all oversubscribed faith free schools to make at least 50% of their places available to those of another or no faith helps to tackle segregation and ensures young people will experience the diversity of religious beliefs that make up modern Britain.”