Communities and Local Government Secretary Hazel Blears will announce pilot projects in 10 areas later.
Residents will decide on how budgets of up to £23m are spent, from recruiting more police to providing play areas.
She will make the announcement at the annual conference of the Local Government Association (LGA), which has questioned public desire for the plans.
Local debates
It will be Hazel Blears' first major speech since taking over from Ruth Kelly following Prime Minister Gordon Brown's reshuffle.
Under the plans, large amounts of council spending would be decided by residents, through local debates, votes and public meetings.
Although similar projects have already been run on a smaller scale with community grants, Ms Blears will say the idea will be extended to cover major parts of local council funding.
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Democracy should be about much
more than casting a vote every few years Hazel Blears |
People will be able to choose whether they want to spend more money on services like extra community safety wardens to tackle anti-social behaviour, new play areas, cleaning up parks, or extra CCTV.
Ms Blears will say the aim is for every neighbourhood to have control of a "community kitty" within five years.
The LGA, itself under new leadership, believes it would be better to devolve the money to frontline councillors who could consult on how the money was spent in their wards.
Power shift
Ms Blears, herself a former councillor, said it was not about "bypassing councils", but aimed at getting local people and the councils together.
She will tell the Birmingham conference that, as well as delivering a real shift of power to town halls, the government of Mr Brown will ensure it is also passed on to local communities.
"Democracy should be about much more than casting a vote every few years," she will tell the conference.
"It should be a daily activity, not an abstract theory. Local people know the needs of their area better than anyone."
The 10 pilot areas are Merseyside, Nottinghamshire, Birmingham, Lewisham, Bradford, Salford, Sunderland, Newcastle, Southampton and St Helens.
Ms Blears told the BBC that it had already been tried in Bradford: "It was really interesting... they had a lot of young people coming together and they thought 'are they going to vote to spend everything on young people?' and in fact after a big discussion they actually voted to spend some of the money on services for old people as well."