According to council leaders the limits will mean the closure of old people's homes, fewer home helps, bigger classes, higher charges for meals-on-wheels, and fewer adult training centres.
The Government insisted the finance settlement was both 'fair and rational'. David Curry, the local government minister, said councils could live with it 'perfectly well, provided they show discipline over wage rises'.
However, Martin Pilgrim, under-secretary of the Association of Metropolitan Authorities, said: 'Local authorities are getting very near to the bone in improving efficiency. The Government can make decisions about local authority funding and not give too much thought to the consequences.'
But he accepted that some caution was necessary. 'I would be the first to admit that this time last year there was an element of shroud-waving by authorities facing redundancies that did not materialise. But there will be no crying wolf this year. This is the first time we have faced cash cuts, so by definition this is the worst we have ever faced.' Sunderland City Council said that it may have to axe 1,107 of its 14,474 jobs. It has already sent formal 90-day notices of possible job cuts to unions and has asked every department for volunteers for redundancy.
Leicester, which thought that, at worst, it was facing a cash freeze, is now looking at a 5 per cent cut. The AMA estimates that 30 authorities will have to make significant budget cuts.
Birmingham said that it would have to set its council tax considerably above government norms if it wanted to protect services.