Labour’s new squeeze on public spending began in earnest on Wednesday as town halls were told to make £4bn ($6.15bn) of cuts and were warned they would get no more cash from Whitehall to cope with the downturn.

Council leaders said the move would lead to a big rise in council taxes and cuts to frontline services, but John Healey, local government minister, said he was sticking to a three-year funding deal that began in April.