Sutton councillors fear they will have to slash yet more services after what they called “a bleak financial settlement for local government” in today’s spending review.

In today’s autumn statement Chancellor George Osborne revealed the Department of Communities and Local Government (DCLG) will have its spending cut by 56 per cent, from £11.5bn to £5.5bn over the next five years.

But despite the cuts Chancellor expected local authority revenue to increase by 13 per cent by 2020/21 because of other changes, including allowing councils to keep 100 per cent of business rates.

Sutton Council leader Ruth Dombey said: “Unprecedented Government cuts to our funding before today’s announcement had meant that we were having to make £74m of savings to our annual budget between 2010 and 2019.

“Now it looks like the Government is going to make further deep cuts to our grant - possibly up to 40 per cent.

“At a time when we are already having to change, reduce and stop many of our services, we are now faced with the prospect of having to make even more savings and that will simply mean that more public services will stop and our residents and businesses will suffer.

“We will be looking at the Chancellor's announcement in fine detail over the coming days but it looks like a bleak financial settlement for local government.”

To combat the fall in DCLG funding, local authorities will be allowed to retain 100 per cent of business rate revenue and 100 per cent of the income raised by selling their assets.

Councils will also be able to raise the tax by up to two per cent to pay for social care services.

The Government will also issue new guidance to encourage local authorities to rein in excessive salaries as the average pay of a council boss is currently higher than the Prime Minister’s.

Sutton Conservatives said in a statement: “Our approach is not simply retrenchment, it is to reform and rebuild.

“This autumn statement delivers on the promise we made to working people in Sutton that we would put their security first. “Protecting our economic security by taking the difficult decisions to live within our means and bring our debts down.

“And protecting our national security by defending our country’s interests abroad and keeping our citizens safe at home.”

Secretary of State for communities and local government Greg Clark said: “Councils have worked hard over the past five years to deliver a better deal for local residents, while satisfaction with public services has been maintained.

“Whilst councils need to continue to play their part in cutting the deficit, they will still have almost £200bn to spend on local services over the lifetime of this parliament - a reduction of just 1.7 per cent in real terms each year.

“Together with our radical devolution agenda and reform of business rates, we are giving local leaders sweeping new powers and financial freedoms to boost local growth and create jobs.”

Sutton Council has already launched several consultations on cutting youth services, children’s centres, libraries and theatres to save money.

It has also offered voluntary redundancy to its entire workforce as a cost saving measure.

In September the council said it must save a further £31m by 2019.