Councils responsible for social care inEnglandwill have £1.5bn taken out of their budgets next year, the government has said.

The cut - detailed in the draft local government funding settlement – represent a 3.3% reduction in councils’ “spending power”, a figure calculated by the government, which takes into account total funding fromWhitehall and local sources such as council tax.

The 3.3% drop comes on top of a 4.7% fall this year and neither figure takes account of inflation or rising demographic pressures on councils in adult social care.

The impact of this year’s cut was that councils are make £1bn in savings in adult social care, and the Association of Directors of Adult Social has predicted that a similar reduction will be made in 2012-13.

“Today’s settlement announcement confirms that local government continues to bear the brunt of public spending cuts in this spending review period [from 2011-15], said Merrick Cockell.

The future outlook for councils worsened last week as chancellor George Osborne signalled deeper cuts to councils than previously planned from 2013-17, in the light of the ongoing problems with the economy.

Yesterday’s funding settlement came as the government announced that local authorities who planned to increase council by more than 3.5% next year would have to put their plans to a local referendum, whose result would be binding.

Most councils froze council tax this year, after the government offered them a grant equivalent to a 2.5% rise if they kept bills for households constant and promised to replicate the grant up to 2014-15 so that councils would not be left with a funding gap in future years.

The government has offered councils an additional grant for 2012-13 to fix council tax levels next year; however, this would be a one-off and thus would leave authorities with a funding gap from 2013-14 onwards.