Devolving power to local communities remains a cornerstone of Birmingham City Council policy, council leader Mike Whitby said yesterday - but only where a business case can be made that the switch will be cost effective and deliver better services.

The important qualification is contained in a long-awaited formal response by Coun Whitby to a critical scrutiny committee report, published three months ago.

The inquiry claimed the ambitious scheme to transfer responsibility for running local services from the Council House to ten district committees had run out of steam, and it hit out at a lack of accurate financial information which made it impossible to judge the effectiveness of devolution.

Councillors said they feared the principle of shifting power from the centre was not embedded in the culture and operations of the council and was actively opposed by some senior council officers. Nor was there any sign that the experiment had delivered radical improvements in services.

But yesterday, a very different picture of devolution was given by Coun Whitby, who claimed the system was the envy of other local authorities.

"Birmingham is ahead of the game with the constituency model and is in a position to help shape policy development at national level and be seen as an exemplar for other large authorities."

District committees, based on the city's parliamentary constituencies, came into existence in the summer of 2004. The mini-town halls, run by 2,500 council employees, shared budgets totalling £100 million and were given powers to run street services, leisure centres, parks, libraries and community centres.

Progress of the scheme, the largest of its kind in the country, has been carefully tracked by Ministers, who regard devolution as the way ahead for large local authorities.

Yesterday, Coun Whitby said he remained committed to the process as a way of improving services and moving decision-making closer to communities.

The development of new, more integrated ways to deliver street services would be treated as a priority, he promised.

Mick Wilkes, who chaired the scrutiny inquiry, said he welcomed the tone of Coun Whitby's remarks but wanted to see hard and fast evidence that devolution was delivering services quickly and efficiently.