Lord Williams of Elvel, the party's environment spokesman in the House of Lords, said: 'The change in culture we are proposing is not something that is going to happen overnight.'
But he countered suggestions from committee members that a Labour government might find it harder than the party in opposition does to tolerate local autonomy.
'You have to take the risk, and certainly there would be a risk. You have to accept there would be alternative centres of
Lord Williams was joined by fellow Labour peer Baroness Hollis and Abigail Melville, the party's local government officer. They outlined ambitions to abolish capping while leaving some residual powers for the environment secretary to step in where necessary.
They also revealed that the party was looking at the use of specific grants, within the context of greater financial freedoms for councils, as a means of delivering national policies such as nursery provision. Councils would be less reliant on revenue support grant, with a minimum of 35% of their funding coming directly from the government.
Ms Melville said annual elections would ensure accountability, as would the requirement to publish an annual local performance programme.
She also spoke of a 'whole range of measures' to reconnect people to local democracy, including citizens' juries, community forums and market research.
The Scottish Accounts Commission also put a case for greater financial freedom for councils in evidence before the select committee.
Professor Ian Percy, chairman of the Accounts Commission, argued in favour of widening councils' revenue-raising abilities and removing capping.
He recognised the need for the Scottish secretary to step in on rare occasions, but said councillors were continually frustrated in their ambitions to provide quality services. 'In recent years the political tension between central and local government has grown very substantially,' said Professor Percy.
This was in part because there were no Conservative- controlled councils in Scotland, and partly because of uncertainties caused by the political debate on Scottish devolution.
But local authorities' financial constraints were also taking their toll, he said.