Britain's best hospitals will be given the power to take over their poorperforming neighbours and set up their own private companies under a newNHS "star rating" system to be unveiled today.

Alan Milburn, the Health Secretary, will publish a league table which willfor the first time give every hospital a performance rating in an effort tospread best practice across the health service.

The rating, which will give three stars to the best and no stars to theworst, is based on a range of measures such as waiting times for operationsand staff vacancy rates.

Under a new system of "earned autonomy" for the best hospitals, theGovernment will also allow the three-star NHS trusts to pay their staffmore, create new services and ignore some Whitehall controls.

In an attempt to reward and encourage more "public sector entrepreneurs",the star performers will be given the right to set up their own privatecompanies to sell their skills.

Using new powers under the 2001 NHS and Social Care Act, three-starhospitals would be allow to set up or take shareholdings in companies whoseprofits could be ploughed back into services.

This would allow NHS hospitals to exploit the commercial potential of theirtechnological expertise for the first time by selling products such as newscanners and other equipment.

The best performing hospitals could also offer cleaning, catering andlaundry services to others hospitals as part of a drive to improvestandards in the health service.

They will be given greater freedom over the use of their assets that wouldallow them to receive the cash from the sale of land and buildings thatnormally goes to the Treasury.

Mr Milburn will declare that the new performance rating will "put our ownNHS stars centre stage", with top doctors, nurses, scientists and cleanersgiven unprecedented rewards.

"We know there's good and bad in the NHS. For the poor performers, we willhave to step in, but for the best performers we will step back and set themfree," he told ministerial colleagues yesterday.

"I want to see a new spirit of public sector entrepreneurship in the NHS,capable of rivalling the private sector. This will show that the best placeto reform the NHS is from within."

Mr Milburn's comments highlight once again his own determination to playdown suggestions that the private sector is being lined up to run andmanage parts of the health service.

The stress on public sector excellence is a central feature of Tony Blair'sdetermination to promote high standards while giving greater autonomy tohigh achieving "front line" services.

Some 24 three-star hospitals trusts will be named today, along withhundreds of two, one and no-star trusts. The worst performers of theno-star hospitals will be subject to intervention ordered by ministers.The move to allow the best performers more freedoms will be welcomed bysome professionals, particularly those heading the leading researchhospitals.

The Royal Marsden Hospital in London developed a new positron emmissiontomography (PET) cancer scannerbut was prevented by law from taking part ina private company to exploit it commercially.

Under the new powers, the hospital would be allowed to take shareholdingsin or create such companies itself as long as it achieved three-starstatus.

"The NHS lost out as a result," said a Government source. "We want toensure that the best parts of the NHS are no longer prevented from winningfor patients."

Ministers had considered a "traffic light" rating system, but they decidedthat a red light for poor performers would worry the public that they weredangerous rather than simply inefficient.