Ministers claimed “the tide had turned” over power being held in Whitehall as their Localism Bill cleared the Commons with MPs voting 300 to 216, a Government majority 84.
Decentralisation minister Greg Clark told the Commons that it would actually hand power back to local communities, describing it as a “landmark Bill”.
Speaking shortly before it received its third reading, he said: “The blindingly obvious fact is that this Bill is overwhelmingly decentralising. It favours the local over the central.
“The effect of this Bill is to see power leave Westminster, leave this House of Commons and House of Lords, and go where it is best invested in local communities. I believe we will look back in 10, 20, 30 years time to see today as a turning point.
“The tide of centralisation has turned, not just because of the decentralising measures this Government is taking forward but because communities across the country are demanding change.”
But shadow communities minister Barbara Keeley said Labour still had “concerns and objections” to the Bill.
She said Labour disagreed “profoundly” with proposals to introduce shadow mayors in 12 of the UK’s largest cities, as well as its reforms to the planning system which would put planning decisions up “for sale”.
“In over 70 hours of debate we have worked hard to improve the Bill but much more needs to be changed and revised,” she said.
“The Bill should not be rushed on to the statute books when it was not ready to start with, when it was not subject to adequate consultation and when ministers have rejected many sensible amendments put forward during many earlier debates.”
Tory MP Andrea Leadsom (South Northamptonshire) said the Bill gave “communities the chance to determine the fate of their own environment”.
The legislation, which will now go to the Lords, will give councils the power to offer new social housing tenants shorter, fixed-term tenancies, ending the right to a council house for life.
It is also designed to devolve greater powers to give local communities more control over planning decisions.
Labour claimed the coalition’s plans do nothing to ease overcrowding in London and the south east, while handing the Communities Secretary 142 extra powers.