The governors of the school decide whether or not they wish to stay in or opt out of government funding and LEA control. If they take government funding they must meet the standards set both nationally (such as accepting the National Curriculum and getting kids to take the SAT assesments, then later take GCSE's or whatever they're introducing at the moment - Applied Exams or whatnot). If they decide to opt out from local authority funding they can run the school with far less government rules - they can decide what to teach, what exams to set, entry procedure (many of the grammar schools and other "old boy" schools make students take a test at age 11 to decide whether or not to accept them - this has caused much criticism and debate recently).
The reason they are called public schools is because, a long time back, they used to be schools that took members of the public (as long as parents could afford the fees), which was a new concept as before only members of the church and certain gentry could get their kids educated.
Recent examples of this debate have surfaced around the issue of GCSE's and A-level exams which some critics believe are devalued - state run schools must still conform to whatever the government states are the current set of qualifications (which are GCSE's and A-levels, plus their vocational equivalents - GNVQ's, Applied GCSE's, VCE, AVCE etc.). Meanwhile a number of schools who have opted out of government funding (and therefore control) can set whatever examining regime up - many are offering European or International Baccalaureate qualifications instead of (or as well as) the national qualifications. Others offer vocational qualifications like BTEC and such.
They also can offer other services like exam preparatory courses (for those who've fallen out of the traditional schooling systems - either state-run or privately-run).
They can offer a religious basis if they want - more so than state schools which can have religion up to a certain point and they must give other religions a certain time - I think the list in the curriculum currently has Christianity, Judaism, Islam, Buddhism, Hinduism and Sikhism as the 'main religions' that state schools have to offer.
Sex Ed has to be offered, although parents can, I believe, opt their kids out as well as inspect materials like books, videos and teaching notes before they are used in the classroom (I'm not sure what the current policy is).
To confirm - section 28 only applied to schools that took government (LEA) funding and therefore had to abide by government curricula. Independent schools (aka. 'public' schools) who did not recieve public funding were not affected.
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