The proposals also give more flexibility to chief constables and remove the central restrictions on how many police officers they can recruit, Mr Howard said.
Mr Howard said the Police and Magistrates' Courts Bill would improve law and order by cutting out bureaucratic controls on how forces spend their cash and by encouraging more community involvement.
The Bill's Second Reading debate takes place in the House of Lords today.
'It will be for local people, chief constables and police authorities to decide how best to police their area; not me, not my ministers, not civil servants.
'These reforms are not about centralisation of policing - but quite the reverse. Local police authorities will be stronger, free standing and more accountable.
'Responsibility for setting the budget will rest with the police authority. It will not be for a committee of a local authority which can be overruled by the local authority. Chief constables, for the first time, will not have to ask my permission to recruit more police officers. They will have greater responsibility for spending money on what they think is right for each force.
'And local people will be in a position to influence the priorities for policing and to find out how well their local force is performing, and will know who is responsible if they are unhappy with the service. Mr Howard said that a wider role for the public in local policing was demonstrated by the open recruitment process for the selection of the independent members of the new style police authorities which he announced yesterday.
He said: 'The public from all walks of life have a role to play in policing. Many local people who know the community and can help to form really effective links with the local police don't happen to be councillors or magistrates, but could make a useful contribution.
'People such as teachers, doctors, voluntary workers, clergy, academics, retailers, tradesmen, taxi-drivers, computer technicians, social workers, hoteliers, hairdressers, bus drivers, publicans, librarians and postal workers. There is no reason why they should be barred.'
The Bill also contains changes to the law, which are needed as a result of the Sheehy Inquiry, and the new discipline arrangements for police officers which the Home Secretary announced in September.