Town halls face a £2.2 billion black hole in their finances - equivalent to a rise of 10 percent or around £100 a year in council tax bills – unless the government injects substantial extra cash, local government chiefs revealed today.

The Local Government Association said the government is instructing town halls to do ever more and meet costs over which they have no control, without providing an equivalent level of funding.

Sir Sandy Bruce-Lockhart, the chairman of the LGA, said the outlook for council tax payers was bleak unless town halls received a "substantial" injection of government cash.

But the claims were dismissed by a spokesman at the Office of the Deputy Prime Minister who described the figures as "pure fantasy" and accused the LGA of "crying wolf".

Sir Sandy said: "The government has introduced new standards and is making ever more legislative and policy demands on councils without providing an equivalent level of funding. The proposed increase in Government grant of £300 million is not even enough to cover basic inflation."

According to the LGA, councils in England are being forced to find an additional £2.8 billion to cover the costs of legislative and policy demands from Whitehall combined with the needs of an ageing population.

This includes additional sums of:

• £663m for elderly and adult services
• £599m for children's services
• £632m for waste management and street cleansing
• £669m for anti-social behaviour, housing and pensions
• £292m for transport

That still left a deficit of £2.2 billion, Sir Sandy said, the equivalent of a rise of 10% or £100 on the average annual council tax bill.