Spending cuts are undermining the Big Society by weakening the powers of local authorities and charities, according to a think tank.

A combination of funding reductions and increasing service demand has meant councils are no longer able to take the lead on community charitable work, the New Economics Foundation (NEF) has said.

Reduced public spending - alongside a doctrine of open public services and competitive tendering - has left the voluntary sector in a state of ‘turmoil’, similarly weakening its ability to pursue the Big Society agenda.

The NEF said spending cuts were reducing the strength of voluntary organisations.

The NEF has warned benefit reforms also mean many are no longer able to meet their basic needs, while the unemployed currently face being trapped in a cycle of low paid temporary work.

A study undertaken by the think tank found the number of people claiming job Seekers Allowance from the start of the recession to May 2013 in Haringey rose from 2,672 to 9,34, while Birmingham saw a near 11,000 person increase.

Town halls must now ensure frameworks are in place to tackle local inequality while reforming commissioning practices to ensure social, environmental and economic values are not lost, the NEF said.

Researcher at NEF, Joe Penny, said: ‘The Government’s plans to build a “Big Society” have been thwarted by the combined effects of recession and their own spending cuts.

‘Local authorities and community-based organisations - those best placed to make the Big Society a reality - are buckling under the dual pressure of budget cuts and increased demand for their services.

‘No Big Society was ever going to fully mitigate the impact of such swingeing cuts to welfare, but concerted action from local authorities, third sector organisations and residents can help make a difference, promoting social justice and well-being at a time of worsening hardship for millions of people.’