Councils say the amount they are losing from central Government funding is actually 8.8 per cent on average but the Government says the reduction in spending power takes into account income councils bring in through business rates and council tax. However it is strongly encouraging councils to freeze council tax for a fifth consecutive year.
Because of the way the settlement works, some councils, such as Tewkesbury, Gloucestershire and Surrey will see their funding rise by more than three per cent while authorities including Scarborough, Lancaster and The City of London Corporation will be hit hardest.
The settlement will be consulted on over the next four weeks.
In a statement to the House of Commons local government minister Kris Hopkins said the Government’s long-term economic plan meant that deficit is falling, the economy is growing and employment is at a record high but that "very substantial savings must be made in public spending" to continue the job.
Local Government Association (LGA) chair, councillor David Sparks, said: "Councils have spent the past four years finding billions of pounds worth of savings, while working hard to protect the services upon which people rely.
"But those same efficiency savings cannot be made again. The savings of more than £2.5 billion councils need to find before April will be the most difficult yet. We cannot pretend that this will not have an impact on local government's ability to improve people's quality of life and support local businesses.
"It is individuals who have paid the price of funding reductions, whether it is through seeing their local library close, roads deteriorate or support for young people and families scaled back."
Chair of The Parks Alliance Mark Camley said further cuts would severely damage the quality of public parks across England.
"We must protect the public parks at the heart of our life and culture. These cuts put at risk a crucial part of our social and physical infrastructure that are used day-in, day-out bringing huge health, social and environmental benefits," he said.
The Local Government Association said that the 1.8 per cent figure did not include the Better Care Fund (BCF) and when this was taken into account, the central grant would fall by 3.7 per cent next year.
"Without including that element of BCF which will not be spent on social care or commissioned by local authorities, the reduction is 8.8 per cent," a statement said.
The LGA said that savings of £2.6 billion will need to be found from council budgets for 2015-16, which brings the total slashed since 2010 to 40 per cent. Over this period councils will have made £20 billion worth of savings.
Research carried out by the LGA earlier this year found 60 per cent of councils said they were considering stopping at least some services next year because efficiency savings are fast running out. This was based on the expected cut for 2015-16 set out in last year's Local Government Finance Settlement.
Sparks called for a "much faster and bolder approach to English devolution" and "a better way of funding public services which shares public money more fairly" from the next government – adding that for many local authorities it was "devolution or bust".
The provisional settlement does not include the county councils, in two-tier authority areas, which also face cuts in Government funding.