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Councils in England will be classified as either high-performing, striving, coasting or poor-performing, according to plans in the new Local Government White Paper.

Described as "a radical programme for improving council services, enhancing local democracy and strengthening community leadership", the white paper plans to build on the Best Value review and assessment regime, as well as local public service agreements, to develop a national performance assessment framework.

Under the proposals, independent public services watchdog the Audit Commission will pull together performance indicator data, inspection and audit reports, and separate corporate governance assessments, to classify councils in one of four categories, including the publication of a "balanced scorecard" so that the public can judge their council's performance.

In return, high-performing councils will receive extra freedom for further service improvements, such as reduced ring-fencing, a lighter touch inspection regime and more opportunity to trade on their successful services.

But where councils are failing, with little or no prospect of improvement, the government has said it will apply early intervention measures, including transferring functions to other providers, putting the council into administration and giving stronger councils, or other public bodies, a role in running the failing services.

Overall however, the white paper promises increased deregulation for all councils, such as limiting ring-fenced budgets to "genuine high priorities for government", more freedom for councils to borrow and invest funds, reducing the numbers of plans and strategies councils have to produce, and scaling back on area-based initiatives and giving local strategic partnerships greater scope to rationalise partnerships.

In announcing the white paper, local government secretary Stephen Byers said it represented a "new vision for local government at the beginning of the twenty-first century" and would "tackle the trend towards excessive central prescription and interference which dominated central-local relations in the 1980s and 90s".

While welcoming the paper, public service unions have warned of the danger of creating a two-tier system of local government by punishing poor-performing councils, thus making it difficult for them to improve.

- Strong Local Leadership - Quality Public Services, available from the Department for Transport, Local Government and the Regions, www.dtlr.gov.uk