Local authorities have been urged to make more savings, including cutting pay, scrapping chief executive posts and ending councillor pensions under fresh austerity moves.
Councils in England will see their spending power reduced by 1.7% next year, Local Government Secretary Eric Pickles announced, leading to warnings of more cuts to services.
Unison said libraries, day centres and youth clubs were already closing under previous cuts, care was being rationed, and young people found that careers advice had "all but disappeared".
Today's confirmation of a further reduction in funding for local services comes on top of the unprecedented cuts councils already have to implement. This is bad news for local services and undermines the role councils can play in promoting economic recovery.
Mr Pickles told MPs the settlement represented a "bargain" for local authorities, adding that the Government would offer support for the third year so that council taxes could be frozen.
A small number of local authorities will require larger savings to be made, but Mr Pickles said no council will face a loss of more than 8.8% of their total spending power thanks to a new efficiency support grant.
As the name implies, to qualify, councils will have to improve services to receive this grant. It is unfair on the rest of local government to expect them to subsidise other councils' failure to embrace modernity.
ITV News correspondent Debi Edward reports:
Mr Pickles said councils were "sitting on" a record £16 billion of reserves, adding: "Councils must keep doing their bit to tackle the inherited budget deficit because they account for a quarter of all public spending and still get through over £114 billion of taxpayers' money each year."
Today's announcement is a fair funding deal that will reward councils ready to strive for their communities and gives them another year to get their house in order. Councils must do three things to get on the right road for their residents: put our fair funding deal to work; do every single one of our 50 ways to save; and accept our council tax freeze offer. Councils that cry wolf without having done all of this are letting their residents down. Councils that put their thinking caps on now can save precious taxpayer pennies next year by cutting out waste and transforming frontline services that vulnerable people rely on.
The 1.7% cut in spending power from next April compares with last year's comparable figure of 3.3%.
The Government published a list of "sensible savings" ideas for councils, ranging from opening a coffee shop in the local library to cancelling "glitzy" award ceremonies.
The 50 tips for town halls also include cutting spending on consultants and agency staff and on head hunters and expensive adverts which can cost thousands of pounds in national newspapers.
They should also get rid of town hall "Pravda" newspapers which keep people up to date on local activities, and there was advice ranging from closing subsidised council canteens to cancelling "away days in posh hotels and glitzy award ceremonies".
Mr Pickles argued that councils needed to find better and more efficient ways of running, with scope remaining for "sensible savings", adding: "With the exception of a handful of authorities nobody has got to grips with procurement.
"More can also be done to share offices, share services, cut fraud and provide more for less."Shadow communities and local government secretary Hilary Benn said Mr Pickles' "unfair cuts" meant the loss of libraries, sports centres, Sure Start centres and places at women's refuges, with the poorest areas hardest hit.
Heather Wakefield, Unison's head of local government, said: "Local councils are already under the Government's financial cosh and today's cuts will push many more vital services over the edge."
Today's local government settlement confirms that local government will continue to bear the brunt of public sector cuts. The cut of up to 8.8% provides no comfort for the next 12 months and, when added to further cuts in 2014/15, will present significant challenges at a time when local government should be focused on economic growth.
Council leaders in seven major English cities have written to Mr Pickles claiming deprived areas are bearing the brunt of budget cuts.
The leaders of city councils in Liverpool, Birmingham, Nottingham, Sheffield, Newcastle, Manchester and Leeds said they had already made "diligent and innovative" savings over the past two years.