It may be an ugly phrase but "earned autonomy" is the foundation of much of the change we are seeing in public services in England.

Last week's publication of the comprehensive performance assessment for local authorities contained few surprises. Nearly 20 years since the rate-capping debacle the handful of councils destroyed by Labour's then far left are still languishing at the bottom of the pile. All that inspection and intervention does not seem to have made much difference for the consumers of their services.

Still, the big story has been the rewards and freedoms that the best councils will receive. They will no longer have to submit 66 separate written plans to Whitehall every year, though all councils will benefit from the overdue realisation that too many strategies have to be reported. The big gains are a three-year inspection holiday and the removal of nearly all ring-fencing of funds. But there remains a question as to what councils will do with their new freedoms.

The most obvious concern is what will happen when funds are no longer ring-fenced. There is always a ritual dance when the government announces dedicated funding. In public, councils object; in private, the more thoughtful officers and members welcome the fact that some monies are protected.

Full freedom will be a great temptation for many administrations, especially as it amounts to nearly one-eighth of non-schools expenditure. Why spend on Cinderella services, such as social care, which go to a minority of your electorate, and a group who rarely vote. Why not dedicate more spending to those electors who support you and need to be rewarded for their loyalty?

In the longer term, bigger issues may arise. The deputy prime minister is establishing an "innovation forum" in which the "excellent" councils can explore areas where in future they might win further freedoms. Where might that take us?

Perhaps we should look to health care for pointers. Alan Milburn's foundation hospitals are being promoted by supporters as a new and dynamic form of public ownership - a mutual that cannot be demutualised, an organisation run as a private company but in the public interest. Perhaps we cannot imagine that model applied to entire local authority departments, but could it come in for discrete areas of service delivery - foundation trusts for children's services or those for people with learning disabilities, for example?

Freedom may be coming, but it is unlikely to be a return to the world we knew before audit overload. Instead it will be a further increase in the mixed economy of provision.

John McTernan is a political analyst.