Newham council has plans for a competency-based pay scale. It will identify and ultimately dismiss poor teachers and reward high performers. Consultants Arthur Andersen, one of the partners in the zone, has been involved in developing the scheme.
The zone will also be inviting the local further education college to run courses in its secondary school. Pupils will also be able to study off-site, for example with local companies or the college.
The primary curriculum may be replaced by one tailor-made to meet the literacy and numeracy needs of the local community.
Ian Harrison, Newham's director of education, said: "We are not going to do anything to make pay and conditions worse. This is an area with a recruitment problem and we aim to attract teachers. We will consult the unions and schools."
He said the competency-based scheme will relate to teachers' skills and rely upon observation and examination outcomes. It will not crudely link pupils' results to pay. It will help identify poor teachers and trigger nationally agreed capability procedures.
Mr Harrison said he was looking at the zone's budget to see how much extra could be put towards pay. "We need to make sure once the zone is over, the local authority will be able to sustain the increase," he said.
In Lambeth, south London, the action zone has already introduced performance-related pay contracts for four specialist numeracy and literacy consultants. They will be paid Pounds 30,000 on a fixed-term contract, but will be able to earn an extra Pounds 5,000, based on performance.
Clare Thomson, the zone's director, said: "The schools and consultants will agree the targets they want to meet."
In Lambeth's zone, the curriculum has been set aside for disaffected key stage 4 pupils so they can take up work-based studies.
The bidding round for the next 25 education action zones has been postponed by the Department for Education and Employment from the end of the month to early next year. Action zone insiders believe tensions between Downing Street policy advisers and the DFEE have contributed to the delay.
The DFEE is under pressure to make businesses more involved and take a leading role. And the new criteria for the next round could include making it easier for parents and community groups to set up their own zones. Businesses have complained they do not have the detailed information councils have in order to complete bids.