Local authorities will face a 6.7% cut in real-terms spending over the next four years as the government moves to devolve more fiscal powers from Whitehall.
Communities secretary Greg Clark said total funding for councils would fall by 2.8% in 2016-17, before rising again to become virtually unchanged by 2019-2020.
He said the agreement, which gave councils four-year budgets for the first time ever would make “local councils fully responsible to local people for their financing – rather than central government”.
It comes after local authorities were told in the Autumn Statement that they would be able to keep 100% of locally raised business rates from 2020.
Alexandra Jones, chief executive of Centre for Cities, welcomed the announcement, but warned that councils would need more fiscal powers and incentives to boost housing, skills and infrastructure.
“By 2020, a reformed council tax and business rate system, together with devolved land and property taxes including stamp duty, would make a big difference in helping local leaders to drive economic growth,” she said.
