Caterers at better-performing local authorities have been given the go-ahead to compete in the private sector.
New powers granted today mean that councils rated "excellent", "good" or "fair" under the Government's performance assessment scheme will be allowed to trade with private companies for a profit.
They will have to set up their own companies to trade through.
Examples of services where this could apply include contract catering and cleaning as well as refuse disposal, IT services and sport and leisure services.
Until now councils have only been allowed to trade with other local authorities and public bodies.
Local government minister Nick Raynsford said: "These powers should help create a dynamic and entrepreneurial public sector, which will increase diversity and choice in the delivery of public services."
Councils will be able to use the profits generated under the new trading powers in any way they see fit.
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