Councils face 'meltdown' on spending

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The majority of the capital's 33 boroughs are expected to receive the minimum rise possible to help them balance their books from next April.

Ministers have already announced what has been described as the "worst settlement in a decade" by council chiefs, who will get an average one per cent real terms increase in grant over the next three years. A breakdown of how much each borough will get will be announced later today.

Town halls claim the tight funding package could be dented further after the Government was accused of underestimating the number of foreign workers arriving in the capital over the next three years by at least 350,000.

Westminster Council predicts a "financial meltdown" in London. Local Government Association chairman Sir Simon Milton warned: "Local councils will have to make tough choices between spending cuts and council tax rises above inflation."

Ministers are expected to threaten to "cap" council tax rises at five per cent.