How does Labour propose to deal with councillors who fail to do their job? Reward them with a £10,000 golden goodbye

The proposals are part of a multi-million-pound pay and perks package for councillors – including higher wages, pension rights and a special exemption to let them claim the dole to top up their council salaries.

But the report by the Councillors Commission was denounced last night by the Tories, who claimed the measures were aimed at "stuffing more cash in the pockets of Labour and jobs for the boys".

The report – to be submitted to Local Government Minister Hazel Blears tomorrow – calls for "parachute payments" to soften the blow for council leaders who are thrown out of power in elections.

At present, the leaders of Britain's biggest town halls, who earn up to £60,000 a year as elected councillors, lose their pay the day they lose their seats.

The report calls for "parachute payments for elected mayors, leaders and executive portfolios who lose office through the action of the electorate".

Or, put simply, council leaders voted out for being failures.

The system would be based on redundancy payments to workers forced to give up their jobs.

It means a council leader who had been in power for 20 years could receive a pay-off of about £10,000 if they lost their seat.

In addition, the report paves the way for salary increases of £5,000 a year for senior elected council chiefs and smaller sums for tens of thousands of other councillors.

It also calls for a wide range of other perks, including index-linked pensions and the right to be paid dole and other state benefits on top of council salaries.

"All councillors should be entitled to access the local-government pension scheme," the report states.

Even parish councillors stand to gain financially under the Labour plan to stipulate how much every councillor in Britain is worth.

At present, councils decide for themselves how much to pay elected members.

The report advocates scrapping town hall by-elections and replacing them with a list of "reserve councillors" to be picked in the regular town-hall election cycle.

This would mean that once a party gains control of a council, it would be impossible to turf them out in a mid-term by-election, however badly they had performed.

Hundreds of experienced councillors in their 60s and 70s also would be swept out of power by the new measures – because they would be banned from serving more than five consecutive terms.

The report also advocates extra handouts for councillors in the form of a "communication allowance" to pay for public relations leaflets.

And current rules that ban senior council officials from doubling as elected councillors – introduced to prevent a conflict of interests – will be relaxed.

Shadow Local Government Minister Eric Pickles said: "It is vital that councillors are arm's-length volunteers and not the bankrolled staff of the town hall.

"At a time when council-tax bills will hit almost £1,400 this April, local residents will be outraged at the prospect of Labour politicians wanting to fleece them even more.

"These policies are all about more cash being stuffed in the pockets of Labour, jobs for the boys and back-door state funding.

"Conservatives will fight these plans and stand up for the local taxpayer."

Mr Pickles added that it was "outrageous" to end town-hall by-elections.

He said: "If a party has a poor record locally – and that applies to all parties, including the Conservatives – voters should have the democratic right to vote for a different party in a by-election."

A Department for Communities and Local Government official said last night: "This is a report from an independent commission and therefore does not represent Government policy or Government proposals.

"We will respond to the independent report when it is published next week."