The coalition is facing a damaging double-pronged assault from town hall chiefs who feel they are being unfairly punished by cuts in local government spending.
The council leaders of three of England's biggest cities - Newcastle, Liverpool and Sheffield - have warned of increasing social unrest and community tensions in the north, which they say has been hit worse by austerity than the south.
But there are also signs of a backlash from rural authorities, mostly Conservative-led, who claim that the shires are losing out disproportionately under the Government's cuts.
The criticism presents a headache for David Cameron and George Osborne, who announced in the Autumn Statement that councils must find a further 2% of savings in 2014/15, on top of the 27% cuts announced in 2010.
The Labour leaders of Newcastle, Liverpool and Sheffield - where Deputy Prime Minister Nick Clegg is an MP - wrote to The Observer accusing Whitehall of "Dickensian" views.
"Rising crime, increasing community tension and more problems on our streets will contribute to the break-up of civil society if we do not turn back," they write.
"The one nation Tory brand of conservatism recognised the duty of government to help the country's most deprived in the belief that economic and social responsibility benefited us all.
"The unfairness of the Government's cuts is in danger of creating a deeply divided nation. We urge them to stop what they are doing now and listen to our warnings before the forces of social unrest start to smoulder."
Separately, The Sunday Telegraph reported that more than 120 rural councils were weighing up a judicial review of the spending settlement for local authorities because it was "grossly unfair" and would hit services in remote areas.
Roger Begy, leader of Conservative-controlled Rutland Council and chairman of a new campaign called "Sparse", told the paper: "Rural authorities for the last 10 to 12 years have been seriously under funded in relation to urban areas.
"For the last 18 months we have been working with the Government reviewing the (spending) formula that takes into account deprivation. Now that has been ignored completely and all the promises ministers made have disappeared. We are going to have to do something.
"This is totally unfair and is going to crucify a lot of rural areas. People are going to be isolated."
Communities Secretary Eric Pickles prompted warnings of further reductions in services when he announced this month that English councils would have their spending power reduced by 1.7% next year.
Mr Pickles claimed the settlement represented a "bargain" for local authorities, adding that the Government would offer support for the third year so that council taxes could be frozen.
A spokesman for the Department for Communities and Local Government said: "Councils must keep doing their bit to tackle the inherited budget deficit because they account for a quarter of all public spending and still get through over £114 billion of taxpayers money each year.
"The local government settlement is a fair deal arming councils with an average spending power of £2,240 per household. It is fair to the north and south, and fair for rural and urban areas.
"Councils can protect frontline services and save the taxpayer billions in cash if they share back office services, tap into their healthy reserves and cut out the non jobs and waste.
"Councils that fail to do these things are letting down their hard working residents."