LIVERPOOL is officially no longer the “lone star state”.

Government inspectors said the city council had moved up from a “one-star” to a “two-star” rating and was “improving well” throughout 2008.

The news means Liverpool is no longer the worst performing council in the country for financial management, a criticism levelled at it by opponents throughout the last 12 months.

But despite the upgrade, it is still the lowest-scoring council in Merseyside. Sefton, St Helens and Halton retained the four-star scores they received and are all still “improving well”.

But the biggest local success story in the Audit Commission’s comprehensive performance assessment was Knowsley, which went from three to four stars.

Although Liverpool has improved since last year, particularly in housing and cultural services like libraries and leisure, it is one of only three in the country, alongside Oldham and Cumbria, to be rated two-star.

Council leader Warren Bradley said he was confident for the future and expected the progress made during Capital of Culture year to continue throughout 2009.

But the city was warned it must still increase Liverpool’s dwindling population to guarantee future prosperity.