Families 'will be hit worst by cuts'

The coalition came under pressure over its controversial 81bn package of cuts as the respected Institute for Fiscal Studies challenged Government claims that those on low incomes had been protected.

After studying the four-year programme of cuts, which includes a fresh 7bn clampdown on benefits, IFS analyst James Browne concluded: "Overall, families with children seem to be the biggest losers."

He said that while the Treasury had claimed the overall package was "progressive" – as a result of measures previously announced by former Chancellor Alistair Darling – it had ignored a third of the welfare changes.

"The poorest are losing more as a proportion of their income as a result of these changes," he said.

The warning came as councils warned charges for car parking, planning and licensing applications and vital services like meals on wheels could have to be hiked to deal with a 26 per cent cut in funding from the Government, which is cutting the budgets of departments by an average 19 per cent over the next four years to tackle the deficit.

Baroness Margaret Eaton, chairman of the Local Government Association, used a speech to warn 100,000 town hall jobs – one in 10 of the workforce – are likely to be lost as the cuts kick in, with thousands expected in Yorkshire. Ministers insist the cuts are vital to avoid economic disaster and are pinning their hopes on more jobs being created in the private sector to prevent a surge in unemployment.

Roads and buses are set to be particularly badly hit, with grants from the Department of Transport cut by 28 per cent. The LGA said this would mean a 9.5bn backlog in roads maintenance would grow, exacerbated by the damage caused by last winter's heavy snow.

Cuts to bus subsidy will have a "major impact" with the Government and councils powerless to tell operators which services should be saved, and there are also fears about how authorities will fund concessionary bus fares for pensioners.

The LGA also said spending on flood defences stands to fall from 763m a year at the moment – a claim the Government was struggling to confirm – to 500m which could put in danger an agreement with the insurance industry to offer cover to homes in flood-hit areas which is due to expire in 2013.

Although it is unclear how the cuts will be applied, Iain Hasdell, an expert in local government at KPMG based in Leeds, said councils in the region are likely to face cuts of at least 18 per cent while others will lose more than 25 per cent.

But councils are also being urged to seize the opportunity to re-think how services are under pressure and actually improve front-line services, rather than simply slash them. Ministers have stressed the need to share resources and merge departments.

Rob Vincent, chief executive of Doncaster Council, said: "The scale of the budget reductions facing Doncaster and the public sector are significant – we have no option but to look at new ways of operating and making savings through staffing reductions."