Umbrella bodies and think-tanks called on communities secretary James Brokenshire to put the sector on a surer footing.
Martin Reeves, local government finance spokesman for the Society of Local Authority Chief Executives, said the settlement offered little “holiday cheer”.
“We are now in the final year of a four-year settlement, with no certainty about what the future holds. Ultimately it contains little to provide any assurance about the long term sustainability of local services,” he said.
Lord Porter, chair of the Local Government Association, said 2019-20 would be “hugely challenging” for councils, which face a funding gap of £3.2bn.
“It is vital that the government uses the final settlement next month to provide the further resources needed to protect our local services in 2019-20 before ensuring next year’s spending review delivers a truly sustainable funding settlement for local government,” he added.
CIPFA chief executive Rob Whiteman challenged the government’s assertion that it has improved funding options for local government.
“While the government can claim they have enhanced flexibility to local funding, when citizens around the UK find increases in council tax rates are to limit service reductions caused by central government reductions, it creates huge political and resident pressures on councils,” he said.
Whiteman added that while it was “good to see” the government’s commitment to finding a more effective funding formula by reforming business rate “in the end this will not mean additional net funding for local government”.
Peter John, chair of London Councils, said: “This [settlement] is a reminder that austerity is not over for local government and confirms that London boroughs have experienced a huge 63% reduction to our core funding during this decade.”
John said next year’s spending review must ensure councils are financially sustainable in the long term or risk “destabilising essential local services”.
Adam Lent, director of the New Local Government Network, agreed: “With the NHS eating up nearly all of the Treasury’s projected rise in spending, austerity is most certainly not over for adult social care children’s services and other core services and this settlement does nothing to resolve that.”
Paul Carter, chair of the County Councils Network, said that extension of business rates pilots, alongside the cancellation of the negative revenue support grant, would help maintain frontline services.
But he added: “Whilst [the] settlement contains vital short-term support, it does not solve medium-term financial pressures so tough decisions will still need to be taken and our members will have little choice but to raise council tax to meet demand-led pressures in services.
“Looking ahead, we should be under no illusions of the scale of the challenge facing county authorities, with the long-term future of councils dependent on whether we receive sustainable and fairer funding from 2020 onwards.”
The local government finance settlement came a week later than initially proposed due to parliamentary debates on Brexit.
This delay came just weeks after the government committed to publishing the settlement on a set date to provide authorities with more certainty.
Brokenshire said councils’ spending power could rise to £46.4bn next year – up from £45.1bn last year.
