There is "setting" in ds's school from P1 (the Scottish equivalent of reception), in that once the teacher has established the relative capabilities there a split into (different) groups for langauge time and number time.
These groups are very flexible - in fact, in P2, ds was moved "down" from the "top" group to the middle group (after 6 weeks extra one-to-one tuition from the depute head, who leads literacy in the school) after consultation with us and in order to maintain his confidence.
Yet for number time, he was moved up to one of the grups in the P2/3 class.
I think setting is a good thing and allows children to work at the best level for them. It does help if you have sufficient resources to allow such small group working.
In P3 we do now have a problem, as having finally "clicked" with reading, he is not being stretched by the middle group, but hasn't covered the work that the top group has been doing.
The groups are given "neutral" names like Apples, Bananas and Pear, or Violins, Flutes and Trupmets - but the kids knwo what they really mean.