Britain’s big cities could be given powers to raise millions for regeneration by selling loans on money markets if the Conservatives win the General Election.

The idea is one of a series of radical measures in a local government shake-up being considered by Eric Pickles, the shadow communities secretary.

Proposals for Brummie Bonds were first put forward at the end of 2004 and backed by Birmingham City Council leader Mike Whitby.

Local authorities are not allowed to raise funding directly from the City, although the practice is commonplace in America and Europe.

Financial institutions would buy bonds from the city council and earn interest.

The council would have use of the money, typically for between 10 and 20 years, before repaying the bond.

The idea could bridge gaps in the cost of schemes such as the new Library of Birmingham, the 50-metre Olympic swimming pool and the Midland Metro tram extension.

Birmingham has been at the forefront of a campaign to convince the government to adopt a more innovative approach to local authority finance.

The council is talking to civil servants about using its massive property portfolio to raise loans for spending projects.

Council leaders also want to set up a municipal bank offering loans at reasonable rates of interest to families and businesses.

Last year, the West Midlands Business Council called for bonds to be issued to pay for improving transportation and regenerating city centres.

WMBC executive director James Watkins urged ministers to follow the example of American cities.

Mr Watkins said: “The issuing of bonds by public authorities works in the United States, Europe and Japan by providing much needed investment to improve basic infrastructure.

“With the West Midlands being starved of cash to improve the roads and other transport facilities we would warmly welcome bond finance.”

A Conservative government would also conduct a cull of highly-paid council chief executives.

Smaller towns and cities would be told to get rid of their chief officers, with powers being transferred to larger council chief executives who would be responsible for running “economic areas” and clusters of councils. The Tories are looking at the example of Brentwood Council, which removed its chief executive earlier this year and now pays £30,000 to share the chief executive of Essex County Council.

Local authorities in adjoining metropolitan areas, such as the seven West Midlands councils, would be encouraged to cut the number of highly-paid officials they employ by sharing backroom operations and some front line services.

Those agreeing to do so would be allowed to keep more of the money they raised through council tax.

Labour hit back, pointing out that six out of the eight highest-earning council chiefs were employed by Conservative-run authorities.