The leader of Liverpool City Council has written to the Prime Minister informing him that the authority is pulling out of the Government's Big Society plans.
The city was one of four pilot areas for the scheme, aimed at giving community groups and volunteers more control over their local services.
But in a two-page letter, council leader Joe Anderson tells David Cameron that the Government's cuts have seriously undermined the ability of community organisations to improve the quality of life of residents.
The letter concludes: "How can the City Council support the Big Society and its aim to help communities do more for themselves when we will have to cut the lifeline to hundreds of these vital and worthwhile groups?
"I have therefore come to the conclusion that Liverpool City Council can no longer support the Big Society initiative, as a direct consequence of your funding decisions."
The Prime Minister announced his Big Society plans in Liverpool last July, with TV writer Phil Redmond leading the initiative.
Mr Cameron said community groups should be able to run post offices, libraries and transport services, and shape housing projects.
Mr Anderson said: "When we agreed to become a vanguard, your Government promised to work with us to remove some of the problems and blockages that were preventing us from successfully delivering our Big Society programme.
"I have to say, the Government has failed to deliver a single change that we have requested, which has severely hampered many parts of our programme."
The letter goes on: "Liverpool has been doing the 'big society' for many years.
"We call it 'working with our communities' and it is something we are very much committed to."
But the council leader said the community's ability to help improve the quality of life for Liverpool residents had been "seriously undermined" by the loss of more than £100 million of Area Based Grants to Liverpool and the council's "extremely poor" local government settlement, which means a £141 million reduction in council spending over the next two years.
"This level of cuts will significantly impact on council services, including the funding of many of our voluntary and community groups," said Mr Anderson.
Sean Brennan, leader of Sutton Council in south London - one of the other pilot areas - said the authority would continue to take part in the scheme.
"It's disappointing that Liverpool has pulled out of Big Society but we will continue to support it because we believe in the principle and taking part in local life is part of our DNA," he said.
"The Big Society is actually very simple - it's about local people knowing what's going on, being able to have their say and get involved in the running of their area if they want to.
"Our experience of the Big Society is that many people in Sutton are not just willing but enthusiastic to play a more active role in their communities if you involve them in the right way."
Shadow Cabinet Office minister Tessa Jowell said: "David Cameron's Big Society is imploding.
"Over the last 48 hours, Lord Wei has said that he doesn't have the time, Phil Redmond has said that he doesn't have any confidence in it, and now the city of Liverpool has decided to pull the plug."Reuse content