A public accounts committee have warned that dozens of local councils are close to collapse and need help after significant cuts.
Some councils may have to be bailed out unless new plans are made to support their vital services, which ministers have failed to do.
There are dozens of local authorities that are close to financial collapse and ministers have so far failed to come up with adequate contingency plans to prop up vital services.
The public accounts committee have released a report warning that urgent support is needed says in a report that the coalition government does not fully understand the impact of significant cuts to council budgets.
If it continues in this manner, the public accounts committee say councils will have to be bailed out as funding is being cut as services continue to rise.
The National Audit Office have also recently found that nearly one in eight councils (12%), including Birmingham city and West Somerset district, are at risk of being unable to balance their budgets and nearly one in 10 are under “high financial stress”.
The central government grant to councils is being cut by £7.6bn between 2011 and 2015, a 14% decrease in real terms. Local government is likely to face another round of deep cuts in the next spending review, as funding for services are no longer ringfenced.
Margaret Hodge, the committee's chair, said:
Departments have provided some information on possible impacts, but it was superficial and incomplete.
Nor has enough work been carried out across government departments to determine how funding reductions in one area of spending might affect services in another: for example, how cuts in local authority adult social care might lead to bed-blocking in hospitals.
There needs to be frank and open dialogue between central and local government and the public on just what services councils will be expected to provide in a prolonged period of declining funding.
The committee's report said the Department for communities and local government's procedures for managing problems with town hall finances or service provision were designed for dealing with one-off failures rather than a wider collapse.
Sir Merrick Cockell, chairman of the Local Government Association, said that social care is likely to suffer:
In some areas local authorities will have to cease providing some services entirely and scale back spending on areas such as social care which have so far been largely protected from cuts.