Communities secretary Eric Pickles described it as "a unique opportunity for councils to show how efficient they could be".
From April 2011, Government grant funding to local authorities will be reduced by an average of 4.4 per cent for two years. But 33 local authorities including Liverpool, Manchester, Doncaster and the London Boroughs of Hackney and Tower Hamlets will all have to reduce spending by 8.9 per cent.
Liverpool and Manchester councils will have to make cuts of £56m each, Doncaster faces losing £27m in grants, while Hackney and Tower Hamlets will both have to save £33m.
Conversely, less developed and rural areas such the Isles of Scilly saw reductions of as little as 0.14 per cent. Other authorities to fare slightly better included Dorset, which will need to cut just £700,000, Surrey, whose funding was cut by 0.31 per cent, and Richmond-upon-Thames, which will now be £1m worse off.