'The changes will strengthen the already important and valued role of local government in Wales,' said Mr Hague. 'This should lead to more local decisions being taken by locally elected representatives and a better service for local people.'
He described the announcement as part of an on-going initiative to 'redefine the relationship' between the Welsh Office and local government.
'I want local government and its partners to rise to the challenge and to come forward with constructive proposals for further change,' Mr Hague added.
However, Paul Griffiths, head of corporate affairs at the WLGA, said a lot more needed to be done in terms of redressing the balance in the relationship between central and local government.
The CCT regime, for example, 'added up to an unnecessary and inefficient strait jacket for the effective delivery of services', he said. 'If the government really wanted to improve relations, then it would be willing to consider a wholesale review of the competitive framework within which local government operates.'
The response to the consultation exercise, published this week, also gives local government greater authority for managing trunk roads and points to the removal of certain administrative controls.
A Welsh Office spokeswoman said that applications for £350 million of European funding over the next three years would be handled by the new executive body.
This would be a company limited by guarantee and owned by its partners - local authorities, training and enterprise councils, quangos such as the Welsh Development Agency and voluntary and private sector agencies. The running costs would be part-funded by Europe and the partners.
Responsibility for European project approval would continue to rest with the technical groups chaired by Welsh Office civil servants.