David Cameron has outlined Conservative plans for "co-operatives" to run local public services.

The Tory leader used a speech on Wednesday to pledge that he would give people control over local services, and powers to set up their own schools.

Speaking in Manchester, a traditional Labour stronghold, he announced the establishment of a 'Conservative Co-operative Movement', which would be independent of the party but "a resource" for activists.

"The co-op movement has generally been associated with the political left," he said.

"I think that's a shame. First, because there have always been people on the centre-right concerned about the effects of capitalism on the social fabric."

Cameron pointed to key Tory thinkers such as Carlyle and Disraeli "who recognised at the outset of the industrial revolution that profit was not the only organising principle of a healthy society".

And he said of co-operatives that the principle on which they are based "captures precisely the vision of social progress that we on the centre-right believe in".

However, speaking in the Commons during a Queen's speech debate, communities secretary Hazel Blears said that "Conservatism and co-operation have as much in common as chalk and cheese".

"The Conservatives believe not in co-operation but in competition," she said.

Schools

Cameron's speech comes as former Tory leader Iain Duncan Smith launches the 'Breakthrough Manchester' report into social problems in the city.

Duncan Smith's social justice policy group recommended that parents should be able to set up schools if those locally were failing.

And unveiling plans to create "a new generation" of co-operative schools, the Tory leader said: "In other countries, co-operative education is central to the system."

The schools, which would be owned by parents and the local community but funded by the taxpayer, would give parents "direct involvement" in their children's education, Cameron said.

He called for an end to "centralised control" and claimed the problems facing schools were "partly ideological – outdated teaching methods, for instance" and "partly political – most of all, the failure to give heads the power to impose discipline".

Labour said the Tories had "no credibility" in the co-operative movement.

"There is nothing new in David Cameron's latest wheeze," said schools minister Jim Knight. "Labour have already given parents the power to draw up plans for their own schools and we continue to back the co-operative and mutual sector's involvement in education.

"Co-operatives have been nurtured and supported by this government over the last ten years - in stark contrast to the neglect and damage they experienced under the Tories, who closed down the Co-operative Development Agency and left legislation untouched for twenty years."

'Social justice'

The Tory leader set out how his party would respond to the social challenges facing Britain, with communities "acting collectively and voluntarily".

"Social justice does not just mean individual action – paying your taxes and obeying the law," he said.

"It doesn't just mean state action – providing universal public services. These things are vital but they are not sufficient.

"Social justice means social responsibility: the idea that we're all in this together, that there is such a thing as society – it's just not the same thing as the state."