Mark Hoban is a former Financial Secretary to the Treasury and Employment Minister, and is MP for Fareham.

Today, I have a debate in the House of Commons on the expansion of free schools and academies. Choice and diversity in education isn’t a new issue for me: I helped to draft our education policy, which put parental choice at the heart of our education policy, prior to the 2005 election when I was our schools spokesman.  But my interest in choice is not purely political – it is personal, too. My parents didn’t choose the nearest school to our home for me or my sisters; they chose state Catholic primary and secondary schools for us – requiring a bus or a car journey to get there.

So I am proud that we have expanded the diversity of schools through the academy and free school programmes, creating choice for parents. But choice is only a reality if there is both diversity and capacity.

You can imagine how hard it is for me when this Government’s policy actually limits diversity where there is the demand for a new Catholic school.  The Coalition Agreement has killed off the prospect of new Catholic academies and free schools. The Agreement says: “We will ensure that all new Academies follow an inclusive admissions policy. We will work with faith groups to enable more faith schools and facilitate inclusive admissions policies in as many of these schools as possible.” This has been translated into a cap on the proportion of places that can be allocated to children of the faith behind the academy or free school. This cap kicks in when the school is oversubscribed, and it could lead to a Catholic school turning away Catholic parents and pupils.

Socially and ethnically, Catholic schools are very inclusive – they have a higher proportion of pupils from ethnic minorities and deprived areas than the average school, and nor are these exclusively Catholic.  Three in every ten children in Catholic schools are non-Catholics. No other type of school is required to apply a quota to achieve inclusivity. We haven’t set quotas by social class, gender or ethnicity. Why single out faith?

Why is the Catholic Church concerned about the cap? It is hard to maintain a shared set of values and ethos if half the pupils don’t subscribe to beliefs and practices of the Catholic faith. That is not to say these schools must be exclusively Catholic, but there is a point when the dilution of its Catholicity means a school loses its ethos. Let me give an example of where that has happened.

In Oxford, parents saw no discernible difference between a joint Catholic/ Church of England school and other local schools – viewing them all as ‘non-Catholic’ schools. Parents voted with their feet, sending their children to other local schools. So, instead, the Catholic Church founded a distinctive Catholic school, St Gregory’s, which is successful and over-subscribed.  The cap thus threatens the ethos which is part of the school’s mission in the first place.  The faith-based admission cap does provide a disincentive to the Catholic Church to set up faith schools.

Do other faith groups share this concern? If a faith establishes a school that is simply not attractive to parents and children of other or no faith then the cap does not apply. Furthermore, some faiths might be happy to see that dilutive effect work, but the experience of the Catholic Church has not been good. We would have a richer and more diverse set of free schools and academies if the cap were removed. It would give more parents the chance to give their children the education rooted in values that they support – a very Conservative idea.

But as well as diversity, we need some capacity in the system to accommodate parental demand otherwise we will need to turn children away.  So schools need to be able to expand.

Between June 2012 and October 2013, 518 academies applied for money to expand but only 142 applications were accepted. That is almost 400 schools where children and their parents had to be turned away.

There is a solution to accommodate this demand. Let academies and free schools borrow to expand; the same freedom that sixth form colleges and further education colleges have.

For a brief period under the last Labour Government, they could borrow ,and Cams Hill in my constituency used this freedom to fund a new sports halI. It paid off its loan and now wants to borrow to increase its intake permanently.  Cams Hill, an academy, is over-subscribed. It has temporarily increased its intake to Year 7 by 30, but capacity constraints mean that this isn’t permanent. Borrowing would enable it to expand. But borrowing is not an option.

Actually, it is not as clear cut as that. In the year to mid-October 2013, 44 schools have been given permission to borrow, and of these 39 were to fund energy efficiency projects – but none were for expansion.

So why can’t academies and free schools borrow? Borrowings by academies and free schools count towards the government deficit and national debt. The Secretary of State cannot not, therefore, approve borrowing to fund expansion.  Borrowing by FE colleges used to be on the Government’s balance sheet, but when we scrapped government controls over their borrowing in 2011, they came off the balance sheet.

So there is a simple solution, if Michael Gove scrapped his control over borrowing by academies and free schools, then their borrowings would not count against government debt. Academies and free schools that are already entrusted to make decisions about the terms and conditions of staff, curriculum delivery and term times would have another freedom: borrowing.

As Conservatives, we should back parents who want to do what is right for their children. Two simple freedoms – the right of academies and free schools to borrow and scrapping the faith cap – would make choice a reality for many more parents and children. It may be that our Coalition partners are the barrier to granting these freedoms. But I believe that a majority Conservative Government should scrap this illiberal cap on admissions to faith schools and allow academies and free schools to borrow.