Local government will receive £300m to ease the transition from dependence on central government grants to greater financial autonomy, the communities secretary Greg Clark has announced.

Mr Clark confirmed yesterday the four-year financial settlement for town halls, which will see cuts in funding from Whitehall and a move towards the 100% devolution of business rates by 2020.

‘These are important times for local government,’ he said. ‘The devolution of power and resources from Whitehall is gathering momentum.’

The councils with the sharpest grant reductions will receive £150m a year in transitional funding for each of the first 2 years of the settlement, easing the impact of cuts.

This is in-line with recommendations from the County Councils Network (CCN) and the Local Government Association (LGA).

The settlement also includes up to £3.5bn being made available by 2019 to 2020 for councils to pay for adult social care; £2bn of this will come from a 2% social care precept and £1.5bn from the Better Care Fund.

Rural councils will see an increase in the Rural Services Delivery Grant from £15.5m this year to £80.5m next year. When combined with their share of the £300m transition grant, rural councils will see an extra £93.2m in 2016 to 2017.

Over the course of the four-year settlement rural areas will benefit from a total of £260.5m Rural Services Delivery Grant.

The increase in funding for rural councils comes after the Government faced a possible rebellion from 30 of its MPs and the Rural Services Network characterised earlier settlement proposals as ‘disastrous’.

Mr Clark said: ‘Today’s settlement means every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement.

‘In addition, we will provide transitional funding for the first 2 years of the Spending Review period for councils as they move from dependence on central government grants to greater financial autonomy.’

Responding to the final local government finance settlement, Lord Porter, chairman of the LGA, said: ‘The LGA has been working hard with the Government on behalf of all councils - both publicly and privately - to highlight the financial challenges they face over the next few years.

‘We are pleased it has listened to our fundamental call for new money to be found to smooth out funding reductions for some councils in 2016/17 and beyond without any other councils losing out further as a result.’

Lord Porter did, however, warn that funding reductions will still pose challenges for councils over the next four-years, despite the transitional funding.

'Any extra cost pressures, such as those arising from rising demand or policies such as the National Living Wage, will have to be funded by councils finding savings from elsewhere. Many will have to make significant reductions to local services to plug funding gaps and will be asking residents to pay more council tax while possibly offering fewer services in return as a result.’

Referring to the move to the retention of 100% of business rates by 2020, Lord Porter said: ‘While it won't solve the long-term funding challenges facing councils, it is absolutely critical to ensure any new system works effectively.

‘We look forward to working closely with the Government on ensuring it is implemented and distributed in a way which maximises the potential it offers to our local communities and businesses.’

Cllr Neil Clarke MBE, chairman of the District Councils’ Network (DCN), said: ‘It is reassuring to see that for the first time in many years there have been significant improvements between the provisional and final settlement. We commend those changes.’