Virginia's counties, cities and towns should not expect large increases in state aid from the administration of Henry E. Howell, the Democratic gubernatorial candidate said today.

"When I get there (in the governor's office,) Sen. Byrd's going to look like a spendthrift compared with me," Howell said.

Howell's statements to the Virginia Municipal League Convention today revealed how far Howell has moved toward the fiscal conservatism in his current race against Republican John N. Dalton. Howell once was the symbol of opposition to the Democratic organization founded by the late Gov. and Sen. Harry F. Byrd Sr. and to the tightfisted policies of its predominantly rural leadership.

Asked by a delegate to comment on the Municipal League goal of increasing state aid to localities during the next six years. Howell stood at the podiumm shaking his head and said deliberately. "One point two billion six years from now ain't on the horizon."

In his answers to questions, Howell returned again and again to the theme of economy in government. "I believe we are going to have more economy in government," he said. "We put a lot of things on every morning that may be more expensive than we need. Look at this tie I'm wearing. It must be a $10 tie. I'm sure I could look just as good in a $2 tie."

In recent years, the Municipal League, established by state law to represent local government interests, has lobbied in the General Assembly for new tax sources to relieve the property tax. Among tax increases it has suggested is a 1 cent increase in the 4-cent sales tax with half the revenue going to local governments.

Howell, however, said he is "unalterably opposed" to any proposal to raise taxes on food, the biggest source of sales tax income. "I will fight it tooth and nail," he said.

Howell said in his speech to the league he would favor a constitutional amendment that would allow counties and cities, subject to approval of voters in a referendum, to enact new taxes themselves and make such important policy decisions as approval of collective bargaining by public employees.

For more than a century, Virginia has operated under a principle of government known as Dillion's Rule that permits cities and counties to take only those actions specifically approved by the state legislature. A recent application of that rule was the decision by the Virginia Supreme Court this year that cities and counties must stop bargaining with public employee unions because the General Assembly had not specifically authorized it.

Many Northern Virginia legislators and others from urban areas chafe at Dillon's rule, but there has been no significant movement in recent Assembly sessions to overturn it. When the Assembly proposed the revised state Constitutions adopted in 1970, reversing Dillon's rule was debated but decisively rejected.

The prepared text of Howell's speech specifically cited new taxing authority and collective bargaining by public employees as options he thinks local governments should have, but he did not use the words, "collective bargaining," or "new taxes" in his remarks.

A majority of the city council members, county supervisors and appointed local government officials who shape Municipal League policy have opposed public employee unions in the past. Gov. Mills E. Godwin two years ago chose the league convention as the forum for a definitive speech opposing collective bargain. A year later he filed the court suit that led to the Supreme Court order.

The convention schedule this year called for a joint appearance by Howell and his Republican opponent for governor, Lt. Gov. John M. Dalton. However, Dalton announced yesterday that he will no longer appear with Howell because of what the called Howell's "personal, unfounded attacks on me and my family."

After the convention appearance, Howell held a one-hour "briefing" for reporters to criticize Dalton's votes on a dozen pieces of legislation acted on during the Republican's years in the General Assembly.

Howell said the Dalton votes include "five or six" that he thinks represent a "conflict of interest" on Dalton's part, but he refused to identify them.

Howell has been criticized in editorials across the state for failing to substantiate his allegation made before a labor convention on Aug. 20 that Dalton tried to enrich himself personally through legislation.

Howell, in turn, has complained that the press, especially The Washington Post, inaccurately reported his intentions to substantiate the accusation.

In speech, interviews and press conference at the labor convention in Roanoke, Howell did not make clear when, if ever, he would back up his conflict charge against Dalton. Many reporters inferred he meant to do so the following Wednesday, but when they besieged the Howell campaign on that day for details on that day they were told that Howell was on vacation in Nags Head, N.C., and could not be reached. Campaign aides said they had no proof of legislative corruption on Dalton's part.

Howell since has identified a bill introduced by Dalton in 1972 increasing certain fees that can be charged on loans by banks as the legislation that created a "conflic" for Dalton.

The Republican has insisted that the bill was meant to apply only to state banks, and not to the national bank of which he is a director in Radford, Va. He also said his bank was already charging more in service charges than permitted by the bill he introduced.