Clegg accused of favouring the South in spending cuts

Addressing an event in Sheffield organised by the Core Cities Group of eight major cities – including Leeds and Sheffield – Mr Clegg insisted the Government had "done everything we can" to ensure cuts are distributed fairly.

But Jon Collins, Labour leader of Nottingham City Council, said that while his council was facing cuts of 60m, authorities in areas like Surrey, Dorset, Essex, Buckinghamshire and Richmond-upon-Thames were facing tiny reductions and in some cases were even seeing a rise in their Government grant.

Presenting Mr Clegg with a graph to illustrate his point, Coun Collins added: "The Deputy Prime Minister needs to be aware of the appalling regressive nature of this. These cuts are going to affect the poorest and most vulnerable, while the better off areas appear to have been protected."

Mr Clegg was addressing the Core Cities conference – which also includes Liverpool, Birmingham, Newcastle, Manchester and Bristol – hours after Labour won the Oldham East and Saddleworth by-election to give Ed Miliband's leadership a boost. The Liberal Democrats were more than 3,000 votes behind in second place, although Mr Clegg was relieved that the party's vote did not collapse completely in the wake of tough coalition decisions.

David Cameron also faced questions over a poor performance for the Tories, coming in third.

Mr Clegg told the conference, which was organised to discuss economic growth, that he was aware they felt "short-changed" by the spending cuts, but he appealed to them to use new political and economic freedoms being granted by Whitehall to help the economy in their cities boom again.

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