Councils in England are facing a £3.3bn reduction in central government funding for local services in 2016/17, according to new analysis by the Local Government Association (LGA).

The LGA’s annual Future Funding Outlook report published today warns councils will need to make further significant savings next year, equivalent to 12% of their total budgets.

The LGA analysis predicts the upcoming Spending Review will cut funding for local services by a further 11% in 2017/18 and 4% in 2018/19 before increasing by 7% in 2019/20.

A combination of reduced government funding and rising demand on social care for an ageing population will leave councils facing a funding gap of £9.5bn by the end of the decade, the LGA says.

The LGA wants radical reform of the way public services are funded and delivered. Next week it will launch a separate report at its annual conference setting out detailed Spending Review proposals for the Government to ensure local services survive the next few years.

LGA chair, cllr David Sparks, said: ‘If our public services are to survive the next years, we urgently need a radical shift in how public money is raised and spent, combined with proper devolution of decision-making over transport, housing, skills and social care to local areas.

‘Fairer funding for local services, and the freedom to pay for them, will allow councils to tackle the big issues facing their residents and protect services which bind our communities together and protect our most vulnerable.’

Responding to the report, local government minister Marcus Jones said: ‘These are premature claims based on funding decisions which have yet to be made. Councils have worked hard over the past five years to deliver a better deal for local taxpayers, but like the rest of the public sector they will have to continue playing their part in tackling the deficit to ensure the economic recovery continues.

‘In the run up to the Spending Review and next local government settlement we will continue to listen to the views of councils, the LGA and others about the best way of distributing funding to achieve fairness, efficiency and local growth.’