Eric Pickles outlines funding cuts for England councils

The worst-off councils in England will have central funding cut by an average of nearly 3%, Eric Pickles has said.

But the communities secretary told MPs the wealthiest councils face average funding cuts of 8.7% for 2013-14.

He did not give a single national figure for funding cuts, but said other measures meant overall that councils' "spending power" would be 1.7% lower.

Labour's Hilary Benn insisted that local services in England's poorest areas would be hit hardest by the cuts.

Mr Pickles was "living in world of his own", he said.

In a Commons statement, the communities secretary said "this is a fair settlement, fair to the north and the south, fair to rural and urban".

"All councils have a moral duty to freeze council tax," he told MPs, announcing that any attempt to raise council tax by more than 2% would result in a local referendum.

Source: Department for Communities and Local Government

From April 2013, local authorities will retain half the amount of business rates raised within their boundaries, rather than transfer them to the Treasury.

This would contribute towards the "biggest shake-up of local finance in a generation", Mr Pickles said, "based on self-determination".

"For the first time in a generation, striving councils now have licence to go full steam ahead and grab a share of wealth for their local areas, to stand tall and seize the opportunity of enterprise, growth and prosperity," the secretary of state concluded.

But Mr Benn replied: "He simply does not understand the impact that his decisions on funding are having on the services and local people who use and rely upon them."

A total of 230,000 council staff had lost their jobs, while libraries, sports centres, sure start centres, and women's refuges had closed, the Labour frontbencher said.

"The Audit Commission has found that, 'the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas'," Mr Benn told MPs.

"Does he have any idea how local councils' efforts to grow their local economies, to encourage apprenticeships, to build more homes, are being undermined every single day by the chancellor's disastrous economic policies?"

He told the Commons that Tory-led West Somerset Council had already been declared by the Local Government Association to be "not viable in the longer term".

The Labour MP for Liverpool Riverside, Louise Ellman, said Mr Pickles had displayed "contempt for the people of Liverpool".

She added: "The cuts announced today are an added blow to a city already reeling from cuts in local public services as a consequence of government decisions."

Mr Pickles had argued that "committed local authorities have protected front-line services".

Funding was now set to "fall in a controlled way", he told MPs, with the "overall reduction in spending power" of 1.7%.

This "represents a bargain to local authorities", Mr Pickles said, which he insisted had plenty of scope to make further savings while "safeguarding vital public services" and "ending the something-for-nothing culture".

"Spending power" takes into account both the core "formula grant" which councils get from central government and other income - council tax and other grants.

In an open letter to Mr Pickles sent the day before his Commons statement, the leaders of city councils in Liverpool, Birmingham, Nottingham, Sheffield, Newcastle, Manchester and Leeds warned that "the cuts we are now being asked to make in the years ahead will go far beyond the level at which we can protect vital local services".

The letter concluded: "It has become clear that amongst the worst hit areas are the core cities and our city regions, where we are facing some of the most intense pressures on services and where the sheer scale of the cuts will be most apparent."

The government announced council funding details for each financial year until 2012-13 in December 2010, when the Local Government Association described the 2011-12 funding settlement as the toughest "in living memory".

Council funding elsewhere in the UK is the responsibility of the devolved institutions.