The Conservative leader has called for large council tax increases to be approved by local referendums.

In a speech to the Young Foundation on Tuesday, David Cameron said that the move should replace the central government "capping" of local authorities in a bid to improve "democratic accountability".

In a speech on the practicalities of citizen empowerment, local entrepreneurship and leadership, Cameron claimed that more power must be devolved from the centre to local "to tailor customised solutions to local problems" and because "diversity strengthens the country as a whole"

And he argued that council tax must be reformed to match this transfer of power.

"All politicians in opposition talk about giving more power to local councils. But all governments seem to end up centralising power," Cameron said.

"I want to prove that we will be different. That we really mean it when we talk about localisation.

"That's why I am announcing today a significant new element in our policy platform: the democratisation of council tax."

Capping currently applies to town halls which propose council tax increases of more than five per cent.

But Cameron said it should be local voters, not ministers, who decide.

"The new powers we will give local councils will reduce the pressure to increase council tax bills," he claimed. "But I don't propose to hand over power to councils without strengthening the accountability of councillors to the people they serve. 

"Today, that accountability is enforced through capping – an old-fashioned idea straight out of the bureaucratic age. I want to replace bureaucratic accountability with democratic accountability.

"Capping will be scrapped - and I want to allow local people themselves to have a say over local taxation. 

"So the next Conservative government will require councils that want to introduce high council tax rises to submit their plans to a local referendum. They must explain to local taxpayers why they want to raise taxes by so much and they must show what they would do – a shadow budget – in the event of their plans being rejected. 

"Council tax referendum ballots would be sent out with the annual council tax bill – and if people voted against the rise, a rebate would be credited to the next year's bill." 

However local government secretary Hazel Blears said the proposal was "just another empty David Cameron gimmick".

"Any local council can hold a local community vote on the level of council tax increase, and some of them already do... you don't need some new law," she said.