He launched guidance on the new round, in which councils with successful agreements will be awarded shares of a £1.5bn pot, some at the outset.
The guidance has been developed with the Local Government Association, which said there would be 'a bigger role for district councils, who will be expected to be one of the main partners [with] shire counties'.
Agreements that omit districts would probably not be approved, it said.
Mr Raynsford said: 'The second generation of local PSAs is significantly more ambitious and challenging for both central and local government.'
There has been controversy over the extent to which Whitehall is prepared to deliver freedoms promised under the agreements (LGC, 25 January 2002).
LGA vice-chair Sir Sandy Bruce-Lockhart (Con) said: 'Local government is committed to setting ambitious targets which are locally owned.
'We now need all departments across central government to share this commitment and award the freedoms and flexibilities we need.'