Residents should have direct control over council funding decisions, a senior Government Minister said yesterday.
Citizens juries could become involved in grant-making decisions, said David Miliband.
Mr Miliband is leading a review of local government, including the creation of city regions and directly-elected mayors.
In a keynote speech, he said central government should devolve power down to councils - but authorities should then directly involve local people in decisions.
Mr Miliband also called for an increased role for voluntary organisations.
It followed similar proposals from Conservative leader David Cameron. Mr Miliband is seen as a potential future leader of the Labour Party.
In a speech at the National Council for Voluntary Organisations in London, he said: "If the 20th century was about enhancing personal freedom, I believe that the mission for the 21st century must be to spread power to citizens both to act individually and collectively."
Mr Miliband said he believed the voluntary sector thrived in partnership with Government and not as an alternative to it.
He went on: "The local government reforms we are developing - a double devolution of power from Whitehall to the town hall, and from the town hall to citizens and local communities - are a major opportunity to rebalance the relationship between the state and the third sector."
But Conservative shadow Foreign Secretary William Hague said the proposals were at odds with the Government's centralisation of services through regional bodies.