Council funding: MPs debate local government settlement
The latest financial pot for councils in England will "pave the way for a more confident, self-sufficient and reinvigorated local government," the communities secretary has said.
James Brokenshire claimed local authorities would have an extra £1.3bn in the next financial year.
But this is their estimated "spending power", not the guaranteed government grant, which will fall by around £1bn.
The Local Government Association (LGA) has complained of a £3bn funding gap.
It said "huge uncertainty" remained over the provision of services.
MPs voted on Tuesday evening to adopt the plans.
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The "core spending power" of councils will rise by £1.3bn or 2.8% to £46.4bn - which includes money raised if councils increase their tax by the maximum 3% allowed and collect strong amounts from rents and business rates.
However, the central grant they get from government will drop by around £1bn on the current financial year.
BBC social affairs correspondent Michael Buchanan said council budgets would shrink by almost 6%, meaning more services would have to be cut.
Opening the debate, Mr Brokenshire said he had listened to councils who wanted more control of the money they raised, and had plans to allow more authorities to keep the business rates they collected.
He also promised a review of the formula used to work out how money is split between areas, saying the current one was "far too complicated and frankly out of date".
He said the moves would "reboot our system" of local government.
"Strong, vibrant resilient communities are more than ever key to unlocking a brighter future for our country," said the minister.
"I hold these dedicated public servants in the highest regard and have faith in them to rise to the challenges that lie ahead to see their people and places flourish with no-one left behind."
'Smoke and mirrors'
Labour's communities spokesman Andrew Gwynne said all councils had been "hung out to dry" by the government over the last nine years and the figure for core spending power was "smoke and mirrors".
He added: "There is no new new money, no new ideas, no recognition of the dire situation facing councils."
The independent Institute for Fiscal Studies calculates that poorer council areas will lose more money that richer authorities.
LGA chairman Lord Porter said: "The money councils have to provide local services is running out fast and there is huge uncertainty about how they will pay for them into the next decade and beyond."