Government lawyers advised that new laws would be needed to stop children being allowed to switch gender in the classroom.
New guidance is being drafted but the legislation needed to ban so-called social transitioning is not expected to be included in the King’s Speech in November.
A government source said: “We’re looking at all options to ensure we have clear and strong guidance that protects children and empowers parents and teachers. No decisions have been taken.”
Education Secretary Gillian Keegan and Equalities Minister Kemi Badenoch have been at odds over how hardline to make the rule changes.
Ms Keegan wants parents to decide on social transitioning while Ms Badenoch wants a tougher approach.
A Whitehall source said that “ultimately it sits with No 10 and the PM has to decide” which way to go.
Sir John Hayes, chairman of the Common Sense Group of Conservative MPs, said Mr Sunak must change the law if necessary.
“Teachers deserve clear instructions about what to do in a challenging situation,” he added. “This whole issue of what schools should do about social transitioning needs clarification.
“It’s important that schools get clear information, and that all of this takes place with the involvement of parents.
“We must not pander to a tiny minority of shrill trans activists who expect to get what they want because they shout the loudest.
“It’s true that a very small number of people are coming to terms with trans identity, and these need care and support.
“Good schools have experience of pastoral care, but they need clear guidance from the government on how to support that pastoral role.”
Conservative MP Nick Fletcher said: “I am concerned by suggestions that we need new or amended legislation to confirm that schools must abide by common sense, reality, and child safeguarding. Schools must ground all children in reality – they must not lie to children or confuse children.
“The protected characteristics in the Equality Act simply mean that none of us can be discriminated against.
“It would be unworkable to suggest that any of the protected characteristics can compel speech or belief or adherence to ideology.
“The government needs to move quickly to reassert this via its guidance for schools before more children are harmed and the learning environment in schools damaged by the promotion of ideology.”
Former Education Secretary Nadhim Zahawi said: “It’s really important that schools get some sensible guidance on this tricky issue – parents and teachers alike need the support.
“Social transitioning is not a neutral action, and we run a real risk to children’s health if adequate protections and support aren’t there.”
Ex-schools minister Jonathan Gullis said the issue is “creating a nightmare for teachers, parents and pupils”.
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