Best councils to get spending autonomy

Top-performing councils are to be given extra powers under plans that are likely to spark accusations that a two-tier system of local government is being created.

The Chancellor, Gordon Brown, and John Prescott, the Deputy Prime Minister, will announce today that the best local authorities will be given greater freedom over how they spend their money. But councils will not be given any extra funding or allowed to tap the capital markets for private cash.

The announcement comes a day after the Government agreed a deal under which the best hospitals will be allowed to raise money independently of government.

The Treasury denied that yesterday's move, which it described as awarding "earned autonomy", would create a split between local councils, because the system for financing local government would remain the same.

The Chancellor will say the Government has decided to expand on existing plans to devolve limited powers to councils. It will give greater freedoms to those councils that are deemed "excellent" by the Audit Commission, which is undertaking a quality assessment of all 500 local authorities in England and Wales, to be published in December.

Mr Brown will say: "To encourage all councils to deliver the best public services, high performing councils will receive substantial extra freedoms to enable further service improvements. These include a dramatic reduction in ring-fencing, reductions in plan requirements from central government departments to a bare minimum and a reduction in inspections by up to 50 per cent." He will also hold out the promise that the best councils will be able to negotiate with Whitehall for additional freedoms.