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The local government finance settlement has left many councils facing "very real difficulties," the Local Government Association has warned.

The Department for Communities and Local Government said today that the grants will be £65.7billion for 2007-8, an increase of 4.9 per cent on this financial year.

But Sandy Bruce-Lockhart said a large number of authorities had only received a 2.7 per cent increase.

"For services other than schools, which are a clear government priority, government funding has increased by 14 per cent in real terms. This is in stark contrast to the 90 per cent provided to the NHS," he said.

Bruce-Lockhart added that the cash would not cover the demands on services, especially on those for elderly people, which was rising.

The LGA also said that the next spending review would give three year grant allocations to local authorities, bringing them up to 2011.

But Bruce-Lockhart said that although the two year settlements announced last year had helped councils with long term planning, it had left "very real difficulties" for many authorities.