Communities should be given more control over their lives to narrow society's "power gap", minister David Miliband has said.
Mr Miliband says he wants a greater role for voluntary bodies
The communities minister called for a "new phase" in the partnership between state and voluntary sector.
Mr Miliband said a "double devolution", from central to local government and then "to citizens", was needed.
But the Conservatives blame the government for centralising too much power since 1997.
Who has control?
BBC political editor Nick Robinson said the government was talking about decentralisation to respond to new Tory leader David Cameron, who wants to give voluntary groups a bigger role.
Mr Miliband denies that, saying he is pursuing an important policy idea.
In a speech to the National Council for Voluntary Organisations, he said: "We live richer, freer and less constrained lives. But the evidence suggests we are no more happy."
The root of this was a sense of "powerlessness".
Voluntary groups could act as "brokers", informing people of the services available to them, he argued. They could also tap into "local knowledge".
Mr Miliband added: "We must find a way of supporting organisations whose value to society cannot easily be measured by targets or defined in contracts."
The speech comes ahead of proposals this summer for reforms of the way local government is organised.
A review by Sir Michael Lyons is also examining what powers should be held by local councils.
In the Guardian newspaper, former Health Secretary Alan Milburn echoed Mr Miliband's views, saying it was time power was put "in the hands of the people".
"People are becoming disengaged because they are disempowered," wrote the MP.
"A less deferential, more democratic world is threatening a crisis of legitimacy for the active politics that is the hallmark of the Left."
Conservative policy chief Oliver Letwin said he hoped ministers were serious about giving communities more power.
But he said government was really moving in the opposite direction, with Whitehall continuously dictating targets to local councils.
Police forces were also being forced to merge and local crime and disorder partnerships were being amalgamated, said Mr Letwin.
He called for responsibility to be shared, with central government setting the "framework" and key decisions being taken locally.
Lib Dem spokeswoman Sarah Teather accused Mr Miliband of "spin".
"With one hand he is stripping local government of its powers, regionalising our police and fire services, and restructuring councils to make them more distant from the people," she said.
"With the other, he is offering half-baked notions of power to local quangos and boards, bypassing any notion of accountability except to the distant secretary of state."