Speaking at a British Urban Regeneration Association conference in Belfast, Sir Jeremy said the fact that central government determines 80% of council funding, coupled with capping and tight controls on capital programmes, 'both circumscribe a council's capacity to respond to local needs and diminish accountability'.
Sir Jeremy's speech carefully avoided mentioning any party by name because the LGA is in political purdah for the duration of the general election campaign. But, with the Conservatives pledged to maintain the status quo on funding arrangements, greater financial freedom for local government is dependent on the return of a Labour government next week.
The LGA chairman has consistently supported a Labour leadership nervous of any demands on the public purse. He defended shadow chancellor Gordon Brown's announcement that he would stick to Tory public spending plans.
Sir Jeremy said councils must be given the freedom to lead partnerships with the private and community sectors and central government agencies, not only in planning and transport but on 'policies which underpin economic regeneration in education, the environment, housing, transport, community safety, public health and community care, culture and sport'.
Elsewhere in his speech, Sir Jeremy called for the modification of ultra vires rules, particularly those governing the private finance initiative and other joint ventures with the private sector.
He also said councils should be encouraged 'to experiment with new forms of internal management including, though I am not an enthusiast for the idea, elected mayors'.
But Sir Jeremy said councils 'should practice subsidiarity and pluralism as well as demanding it of central government and its agencies'.
In a swipe at quangos, he said: 'Health trusts, training and enterprise councils and public utilities should be required to report to and be scrutinised by democratically elected bodies either at local or regional level.'