School inspectors are demanding new powers to tackle unregistered conservative faith schools accused of 'spreading beliefs that clash with British values'.

A major new report from the schools' inspectorate Ofsted on Wednesday warned that some religious schools are undermining principles like tolerance and respect in their teaching.

It also warned the proportion of independent schools, like private faith schools, that were judged inadequate rose from 31 per cent to 40 per cent including a number of 'highly conservative' Christian, Jewish or Muslim faith schools.

Amanda Spielman, the chief inspector, will call for new powers to clamp down on a legal loophole that allows unregistered and illegal schools to educate children without government oversight. She said spreading 'shared values' will be one of Ofsted's priorities for the next year.

'Current legislation is inadequate to tackle unregistered schools. It limits our powers and allows institutions to exploit loopholes about definitions of education,' she will say.

'The existence of unregistered schools is possible because there is no requirement to register a child as home educated, so there is no record of children who have never been in school.'

The debate around school inspections and a focus on British values prompted warnings from some church leaders that Ofsted could force faith schools to promote issues like same-sex marriage which contravened their religious beliefs.

But under the current system the government has no means of checking what happens to children after they are withdrawn from school and there is no database of children who are being home schooled. This means parents can remove their child from mainstream school and send them for an illegal and extremist education.

'In some of these schools, the premises are unsafe or squalid. The most basic checks are not always in place. Inspectors have also found sexist and sectarian literature in some schools,' Ofsted's annual report will say.

'In even more extreme cases, children are being educated illegally in unregistered settings. This means there are no safeguards in place to make sure children are either safe or receiving a decent education.'

Raddi Dr Jonathan Romain, chair of the Accord Coalition which campaigns against faith schools said the report was 'no surprise'.

He said: 'It is inevitable that those faith groups that wish to prevent their pupils from mixing with other children are also at odds with some of the values of wider society.

'Their schools are deliberately being used to isolate children from social trends, gender equality and sexual ethics that are intrinsic to modern Britain.'