Treasury minister Liz Truss has been branded “innumerate or inept” after falsely claiming that local councils are not facing cuts.

Philip Hammond’s deputy insisted the government was simply giving town halls more “flexibility” to raise money themselves, rather than slashing their funds.

“We are not making cuts to local authorities,” Ms Truss told BBC Newsnight.

In fact, the Local Government Association highlighted this week that funding will be reduced by 36 per cent next year, the largest annual deduction in almost a decade.

And the organisation’s Conservative leader has warned that more councils will go bust unless ministers “address the funding crisis”.

Andrew Gwynne, Labour’s local government spokesman, condemned Ms Truss’s comments, saying: “This shows she’s either totally innumerate or completely inept.

“Councils of all political persuasions are edging towards the financial cliff edge, and it’s a Tory Council, Northamptonshire, that’s the first to go bump on their watch, with others not far behind.

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“The facts are this: Over half the Government grant to councils has been slashed since 2010. This is forcing very real cuts to the vital local public services we all rely on.”

The analysis echoes that of Lord Porter, the Tory chairman of the LGA, who said, just four days ago: “If the Conservative conference does not address the funding crisis in our local services, it will have been a waste of time

“More and more councils are struggling to balance their books, facing underspends and having to make in-year budget cuts

“This is damaging their ability to provide dignified care to our elderly and disabled, protect children, boost economic growth, fill potholes, build homes and much else

“If the government fails to fund local government adequately, there is a real risk to the viability of some services and some councils.”

However, in the interview, Ms Truss claimed: “What we have done with local authorities is that they are able to raise much more money locally than they were before.”

And, asked about the cuts, she replied: “We are not making cuts to local authorities. What we have done is give them more revenue raising powers so that decisions can be taken locally.