The Department of Communities and Local Government (DCLG) has been warned it could face further budget cuts of up to 40%, when the 2015 spending review is published in November this year.

Chancellor George Osborne has written to all heads of departments instructing them to map out scenarios from cuts of 25% and 40% to their resource budgets by 2019/20.

According to The Treasury, this announcement is a repeat of reductions requested ahead of the 2010 spending review which has already delivered around £98bn of savings.

The latest cuts are also on top of the £12bn reduction in the UK’s welfare bill. Osborne is looking for ambitious reform proposals from Government departments over coming months, including detail of how they can contribute to reductions in a circa £300bn Government property portfolio. The Ministry of Defence is singled out as owning around 1% of all UK land.

'This spending review is the next step in our plan to eliminate the deficit, run a surplus and ensure Britain lives within its means,' Osborne said.

'We’ll invest in our priorities like the NHS and national security. Elsewhere in Government, departments will have to find significant savings through efficiencies and by devolving power, so people have a greater say over the issues that affect them and their communities. We’ll deliver more with less.'

In repsonse, chair of the Local Government Association Cllr Gary Porter said: 'A 25% real terms reduction to the local government finance settlement would mean a decrease of £4bn by 2020 while a 40% reduction would mean this rises to £7bn.

'For many councils, there are few efficiencies left to be made and these alone will not be enough to cope with further funding reductions. Vital services, such as caring for the elderly, protecting children, collecting bins and filling potholes, will struggle to continue at current levels.

'If our public services are to survive the next few 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.'