The Local Government Association is calling on political parties to offer people who volunteer for charity a discount of up to 10 per cent on their council tax bills.
The umbrella body wants the parties to include in their election manifestos a commitment to establish a £50m start-up fund to support a scheme that would recognise "community heroes" who volunteer with charities and in their communities in England and Wales.
The scheme would give local authorities enough cash for a "community contribution discount" on council tax bills for people who engage in activities such as running youth clubs or helping older people.
Those who make a "sustainable commitment" to improving life in their local areas – in a way that saves other council taxpayers money – would receive the subsidy.
But the National Council for Voluntary Organisations warned that the measure would necessitate the creation of a potentially burdensome inspection regime for charities and local authorities.
The LGA estimates that a £50m fund would allow 500,000 volunteers to get 10 per cent off their bills next year, although discounts would be set locally depending on the needs of a particular area.
"A community contribution discount would not only recognise the fantastic work volunteers do, but could help to save the public purse many millions more than it costs," said a statement from David Sparks, chair of the LGA. "It could help to raise the profile of volunteering and encourage a new generation of volunteers to step up."
Sparks said that by making money available for councils to reward local volunteers, the government could reap the benefits for families, neighbourhoods and the economy many times over.
The NCVO said the proposal raised practical problems and would go against the principle of volunteering as a selfless act.
Justin Davis Smith, executive director for volunteering and development at the NCVO, said: "In order to monitor volunteers’ involvement and to prevent abuse, it would be necessary to create an inspection and audit regime that would be burdensome for both charities and local authorities. Rewards for volunteering muddy the water and undermine the principle that volunteering is done freely."
Davis Smith said the proposal might fall foul of minimum wage legislation, which requires volunteers to be unpaid; he said a better approach would be for councils to invest in opening up their services to local charities and in supporting local volunteer centres.
Local authorities are already able to give local discounts on a discretionary basis, but this has been restricted by government cuts to council tax support funding, according to the LGA. Some councils offer discounts for special constables and army reservists.
In 2011, as part of its policy review on civil society, the Labour Party said it was considering offering a "community dividend" as a reward for people who do voluntary work.
It was also looking at the role of time banking, in which people are given credits for voluntary work and can use them to claim help from others in the community.
Neil Cleeveley, acting chief executive of the local infrastructure body Navca, welcomed the new proposal.
"So many of the things we value most in our community are made possible by volunteers, whether it is running sports clubs, friends of local parks groups or lunch clubs," he said. "It would be good to see the value of all that great work that volunteers do being recognised in this way."