Power to the people: voters to decide how councils spend their money

Residents will be able to vote to axe unpopular fortnightly rubbish collections or use a "community kitty" to build new school playing fields.

Communities Secretary Hazel Blears promised it would herald a "real shift" in power to neighbourhoods away from centralised state control.

But exactly a week after Gordon Brown pledged an end to the era of spin, the plans were trailed in a pro-Government newspaper before they were announced to MPs and the wider public.

It was claimed residents would have control over £20million of local government funds - but it later emerged the money will be spread over four years and across ten pilot areas in England.

This means £500,000 will be in the kitty every year, scarcely enough to buy one playing field or weekly rubbish collections for around 40 streets.

The pilot schemes will take place in Birmingham, Merseyside, Lewisham, Bradford, Salford, Sunderland, St Helens, Newcastle, Southampton and Nottinghamshire.

Miss Blears said local people would receive training on how council budgets work.

Within five years, the powers will be extended to every local authority in the country.

Residents will be nominated to sit on panels, which will draw up suggestions for spending the money. A shortlist will be put to every local council tax payer.

The Minister told the Local Government Association' s annual conference in Birmingham: "Democracy should be about much more than casting a vote every few years.

"It should be a daily activity, not an abstract theory.

"Local people know the needs of their area better than anyone.

"This Government is delivering a real shift in power to town halls, and ensuring town halls pass this on to local communities.

"We want to bring devolution to the doorstep, giving communities a direct say over how to tackle the things that matter most to them - from improving playgrounds, to tackling litter, to making their street safer."

Ed Cox, director of policy for the independent Local Government Information Unit, said empowering communities with spending had been widely adopted in South America.

He said: "By making some aspects of council finance a neighbourhood issue I have witnessed large community meetings in Brazil where there is positive, proactive dialogue about local spending priorities where councillors are recognised as the true community champions."

In a speech to the same conference, Mr Cameron promised a Tory government would introduce more elected mayors and give councils more freedom to spend their cash by ending ring-fenced budgets.

He added: "This is a ridiculously over-centralised country and I stand before you a convinced localist.

"A decentralised country, with local people in direct control of the decisions which affect them, is a more free country.

"Hazel Blears has announced that she is giving people a little bit of power to spend a little bit of money.

"By contrast, we would give people a lot of power to spend a lot of money.

"It is one of the great tragedies of our politics that local government is so little regarded by the public."

The Tories also seized on the way the proposals were leaked to the Guardian before they were published - despite the Prime Minister's promise that all new policies will be unveiled to voters or Parliament first.

The party's communities spokesman Eric Pickles said: "It looked for a week like Gordon Brown was making an effort to do away with spin but it seems like a case of old habits die hard."