A council once named the worst in the country finally has received a clean bill of health from inspectors.

Walsall council is to be taken out of special measures after three years, Ministers announced.

It means the authority, once accused of financial mismanagement and bullying staff, will no longer have its every move scrutinised by Government officials.

At one stage the council's entire senior management resigned, and was replaced with officials from other authorities across the country.

But Local Government Minister Phil Woolas announced that the monitoring arrangements that have been in place since 2002 will be brought to a close.

The change in status could lead to a windfall for local services, as the authority will now be able to bid for Government grants.

The council's failings were exposed in a damning report by the Audit Commission which revealed "deep-seated" problems with services, "hand-to-mouth" budgets, and councillors involved in " bullying and intimidation" of council officers.

The council's education service was also criticised by Ofsted for failing vulnerable youngsters, and inspectors condemned the social services department as among the worst in the country.

For two years the authority did not appear in the annual league table of council performance, because it was deemed to be even worse than the lowest possible rating of "poor".

Mr Woolas said yesterday: "I congratulate the council on their achievements over the last three years."

The authority's performance was now officially classed as "fair", he said.

"It is a striking example of what can be achieved when members and officers are committed to working together to improve.

"It is important that the council now builds upon these achievements."

Coun Tom Ansell (Con Aldridge Central South), the council leader, said: "Our strategy is to boost services in ways that will convince every citizen that they are served by an excellent council. At the end of the day it is the views of local people that really count."

Chief executive Annie Shepperd said: "Walsall has shown that no local authority is ever a lost cause and that political leadership, a strong management team, and a committed and talented workforce can achieve anything."

Council leaders have set a goal of being named an " excellent" authority by 2008.