Ministers said in 2008 that they would give £50 shopping vouchers or £10 cash for botched street repairs or missed bin collections.
But nothing has come of it despite them spending £114,000 of taxpayers' money reviewing the proposals.
The Government has proclaimed it was axed as it was "low on the motivator radar".
Shadow Local Government Secretary Caroline Spelman said: "This is yet another example of Gordon Brown spinning empty promises to frustrated taxpayers and failing to deliver."
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