TWO Teesside councils have been chosen to pilot a government scheme aimed at improving local services.

Middlesbrough and Stockton borough councils are among the latest to be selected for the local Public Service Agreement (PSA) initiative.

Designed to give authorities more freedom in deciding how best to meet people's needs, it includes the offer of extra cash if they exceed agreed performance levels.

PSA agreements will set out exactly which areas the councils intend to target.

Sir Jeremy Beecham, chair of the Local Government Association, which is helping to run the scheme, said he was delighted to have the Teesside councils on board.

He said: "The scheme offers the prospect both of securing valuable improvements in vital services for local people and of transforming relations between local and central government."

The PSAs for Middlesbrough and Stockton will focus on about 12 key areas which will reflect a mixture of national and local priorities.

In return, central government departments will offer a package of agreed freedoms to help the councils deliver better services.

The two authorities will be reimbursed by up to £50,000 to cover the scheme's administration costs, and will be able to apply for extra grants of up to £1m to carry it out.

Local Government Minister and North-West Durham MP Hilary Armstrong said: "The pilot exercise will be valuable in working up a scheme which can be progressively rolled out to all authorities who wish to participate.