The details of what the government is proposing are due out early next month, but reports suggest they might include a plan to reward schools for good exam results with extra cash which could be used to fund teachers' bonuses.

Mr Blunkett told a conference in London on Tuesday, organised by the Fabian Society, that modernisation was essential to raise standards in education and to attract the best graduates into teaching.

He said schools could no longer remain "worlds apart" from other areas of employment where it was accepted that excellence should be rewarded.

And he promised once again that a "very substantial number" of teachers would benefit from the changes to be proposed in a Green Paper consultation document.

'Disappointed'

But the General Secretary of the National Union of Teachers - which has already threatened industrial action - Doug McAvoy, said he was "deeply disappointed" after Mr Blunkett ruled out an overall increase in pay.

"Teacher supply figures show an overall shortage. If the Green Paper only tinkers with those underlying problems and doesn't address the need to pay teachers properly, it will not hit the target," he said.

"We know our members say 'no' to performance-related pay."

Mr Blunkett listed the questions the government had asked in seeking to make teaching a more attractive proposition, in view of the recruitment difficulties.

"Can we afford to pay all teachers more simply for what they are doing now?" he asked.

"We know we can't afford, even if we wanted to, simply to hike everyone's salary at one go. That would not achieve the goals we want to achieve.

"Do we want to pay teachers more for doing well?

'Nonsense'

"The answer is very much 'Yes'. We want to see the rewards and the investment we make substantially increased. We have to make those resources available.

"Outside the teaching profession, what we are saying would not be considered desperately radical," he said.

"People say its difficult to make judgements about whether there are good teachers. That's nonsense.

"Everyone who has been through school knows perfectly well who is a good teacher. What we have to do is to refine the method for defining them, so that it is transparent and fair.

"People say that it is a break with the principle of egalitarianism. But egalitarianism which rewards poor performance isn't very egalitarian at all."

Mr Blunkett ridiculed the idea that teachers would take industrial action once they had seen the details of what was proposed.

"I haven't come across any trade union worth its salt that has gone on strike against more pay," he said.