The clarification follows the government's defeat last month during the committee stage of the Welsh reorganisation Bill when its proposals to establish a unitary Powys were rejected in favour of three smaller unitary councils.
Under-secretary of state for Wales Gwilym Jones said the major advantage of the proposed area committees over the two-tier system was that 'much more will, or could, be decided in a shire committee than is determined at present by a district council'.
Money would be transferred to area committees in the form of a block grant, he said, but each committee would decide how to allocate it between service areas. However, he later said the secretary of state had not ruled out the possibility that committees could levy their own precept.
Under-secretary at the Council of Welsh Districts Paul Griffiths said the opposition had succeeded in uncovering a 'complete lack of coherence in the government's position'. However, Powys CC welcomed the announcement.
'It puts the provision of services back where they belong at the top of the list but sensibly recognises the loyalties which exist in some parts of the community to the traditional shires', said Sidney Pritchard, chairman of the policy and resources committee.