The government will take back control of schools and reduce the power of principals, admitting it had lost its ability to intervene in classrooms and keep track of more than $1.25 billion in Gonski money.

Education Minister Sarah Mitchell on Friday said she was unhappy with the way Local Schools, Local Decisions (LSLD) reforms – introduced by the Coalition in 2012 to give public school principals more power over their own schools – were working.

"It is clear that changes are necessary to lift results," she said. "It is time to rebalance LSLD, giving greater ability for interventions in instances where schools are seeing particularly concerning outcomes for their students."

Education Minister Sarah Mitchell says there needs to be more accountability in the school system. Credit:Janie Barrett

There should be several layers of accountability to ensure principals' decisions were focused on student outcomes, Ms Mitchell said, but "[that] cannot happen across the whole system while we have a policy that totally devolves decision-making power to each local school".