Top-performing councils will be free to spend money and run their affairs without interference from central government, ministers have announced.

They will be allowed to decide locally where cash goes, rather than the current "ring-fencing" system, limiting where Government money can be spent.

Local Government Minister Nick Raysnford said his new Bill was a substantial devolution of power to local authorities, giving councils greater freedoms and flexibility.

It was welcomed by the Local Government Association, but criticised by some councils as not going far enough.

Only a handful of authorities classified as excellent will reap the rewards from the full range of benefits.

Mr Raynsford said all councils would have red tape and unnecessary controls removed.

"For the best performers, we will go much further and give them greater scope for innovation. We see these councils as flagships for setting new standards and practices."

Councils rated good and fair will receive varying degrees of extra freedoms, and even weak and poor councils will get a proportion of benefits.

Sir Jeremy Beecham, chairman of the Local Government Association, said the new Bill welcomed the extra freedoms for some councils, but added: ''It is essential that we go further in rolling out greater freedoms and flexibilities to all councils."