Ruth Kelly, the Education Secretary, has said she will not prevent headteachers from using new information about pupils' performance to sack teachers.
The Department for Education and Skills denied a report in a Sunday newspaper that schools will use the information to "purge" failing teachers.
But asked if she would support heads who used the data to sack staff, Ms Kelly told The TES: "I think this is about teachers deciding what is right for their pupils and right for their school and the solution varies."
The Government is due to publish an education white paper which is expected to propose that schools make better use of pupil-level information and that parents be given data showing how departments within schools perform.
Ms Kelly said she hoped schools would use the data in a supportive way to help staff.
Schools can already use electronic data on how pupils perform from year to year to judge departments and individual teachers.
Steve Sinnott, general secretary of the National Union of Teachers, said:
"If headteachers, under pressure from the Government, use individual pupil data for disciplinary or competence proceedings, then the union will take action to protect our members."
Ms Kelly said: "What the pupil- level data will do is help inform school leaders so they really concentrate on the strengths and weaknesses of their school and learn from one another.
"It will help shine a light on the weakness within a school - it could be a weakness in the management team, it could be that the school has big differences in the performance of girls and boys, or differences in performance of ethnic groups.
"It would be ridiculous for me to tell a school, in the abstract, what to do. Often it will just be helping a teacher learn more effective practice - a teacher perhaps, spending time observing other classes."
Teachers' unions have been concerned that such data could be used to sack teachers since the Pupil Achievement Tracker system was introduced two years ago.
Schools have used software since 2000 to compare results with national trends and make it easier for heads to see how departments and individual teachers compare.
The Secondary Heads Association said there seemed little new in the Government's plans, as many heads had been using similar data to assess staff since the early 1980s.
John Dunford, general secretary, said: "I remember using the ALIS system from Durham university back in 1983. There's nothing sinister about it. Of course schools are going to use that data if there is a competency issue, but they will look at other matters."