Funding changes will push councils to breaking point and place existence of local services under threat, the Local Government Association (LGA) is warning.

Government funding of local authorities is being phased out as part of a move towards local government keeping 100% of its business rates income by the end of the decade.

The LGA says the speed at which Government funding will stop altogether has left some councils facing deeper than expected reductions in 2016/17.

This move – what the LGA describes as a ‘radical shake-up’ – will also result in almost half of all councils (168) losing all funding from Whitehall by 2019/20.

These councils will also still have to hand over more than £150m extra of their local business rates income because of the phased nature of the business rates reforms.

Councils have long-called for further flexibility in the setting of council tax and town halls across the country are considering rises of up to 1.99%.

In addition, they may also add an extra 2% onto council tax bills to pay for adult social care.

However, while council tax increases will help ease funding pressures on councils, the LGA argues it may still not prevent the need for cutbacks to local services.

The LGA calls on the Government to provide transitional financial support over the next two years for when councils are left with insufficient resources to run services.

It is also calling for Government to smooth out its local authority grant funding cuts to councils over the next few years.

Cllr Sharon Taylor, LGA Vice Chair, said: ‘The pace at which government funding will be phased out over the next few years was hugely unexpected and is placing significant pressure on some councils and their local services already stretched to the limit by rising demand and years of growing funding pressures.

‘Councils have been planning for further funding cuts in 2016/17 but some will have to find millions of pounds more in savings than they had planned for in even their worst-case scenarios next year.’

In response to the LGA’s call for transitional financial support to councils, Cllr Neil Clarke, chairman of the District Councils’ Network (DCN) said:

‘The District Councils’ Network is fully behind the LGA’s call for the Government to provide councils with transitional support to dampen the severity of the financial impact the majority of our 201 members will face before the end of the decade.

‘The DCN is determined that full business rates retention should give councils a route to “financial independence” and we are actively working with our County Councils Network colleagues to develop proposals about how this can work to ensure all elements of essential public services are funded.

‘It is especially vital that those many districts, which have done the most to support new housing growth, should not be perversely penalised by negative Revenue Support Grant and cuts to New Homes Bonus payments.’