Communities Secretary Eric Pickles has announced that the spending power of councils in England will be cut by 1.7% next year.
Mr Pickles said no council will lose more than 8.8% in 2013-14, as he delivered a Commons statement on local government funding on 19 December 2012.
He said the settlement was fair to "north and south, rural and urban, shire and met".
But Labour's Hilary Benn said it was a bad day for local authorities and claimed the poorest areas in England would be hardest hit.
Mr Pickles told the Commons the new system of funding was based on self determination and financial independence.
He said it was "a move from the begging bowl, to pride in locality" with power shifting from Whitehall to town and county halls.
But the shadow communities and local government minister accused Mr Pickles of "living in a world of his own".
Under the reforms, councils will be able to retain half of the business rates they collect from April instead of returning them to the Treasury.
Council funding elsewhere in the UK is the responsibility of the devolved institutions.