I have a strong sense of deja vu. Thirty years ago a campaign was launched across the UK to combat the major cuts and the cap on raising local revenue initiated by the Conservative government. All those years ago, I was leader of Sheffield city council – the fourth largest authority in Britain – and chair of the local government campaign unit. We were determined to take on Margaret Thatcher's draconian cuts to local government spending and to challenge the threat to a free, pluralistic, local democracy that they posed.

Today we are seeing even deeper cuts to local authority funding and a similar threat to local democracy, but the revolutionary fervour, sadly, does not exist. Instead, we have a coalition government that puts up the junior Liberal Democrat minister in the Department for Communities and Local Government to tell Radio 4 just before Christmas that "many people will be surprised at the announcement" of further cuts to council funding. He hoped we would be pleasantly surprised.

Those who understand local government finance and its consequences were indeed surprised at the audacity of the secretary of state responsible. Eric Pickles. leader of Bradford for a short period of time at the tail end of the Thatcher era, is not the fool he presents himself to be. He is thoughtful and educated, and understands perfectly well the fallout of his decisions.

Where the media bothered to report the news at all, headlines talked about a 1.7% cut. However, those who knew what they were talking about appreciated that this is on top of an average 28% cut in local government finance announced in 2010. They would also understand that there is already a major north-south split (with the exception of London), which sees authorities such as Surrey, Richmond and Dorset hardly touched, while in the West Midlands and the north in particular there is almost devastation.

The 50 councils worst affected by government cuts will face a reduction of £160 per head on average, despite the fact that about a third of their children already live in poverty. The 50 councils least affected by the cuts face an average reduction of £16 per head, despite having child poverty rates of just 10%. The prime minister's local authority of West Oxfordshire, one of the least deprived in the country, is losing £34 per head, while Hackney – the most deprived borough – is facing a massive cut of £266 per head.

Councils are reaching the point where they will only be able to carry out their most basic statutory duties. Services for older people are at breaking point. Local people (because it's not the councils that are taking the cut, but the services provided) are facing reductions far in excess of central government departments. Austerity is a local affair.

So why isn't there the revolutionary fervour that there was back in the 1980s? Partly, I think, it is because the coalition government is such a shambles that people do not see the ideological hand behind its policies. And partly it is because local government does not have the coherent campaigning voice that it had in the 1980s.

But above all, the message of "austerity" has successfully debilitated the will to take on central government. That, coupled with the defeats of the past (the high-profile campaigns of the 1980s were temporarily effective but ultimately they failed), means that those councils contemplating measures such as combined action to refuse to implement cuts are treated with derision. If it was not possible for local government to take on and defeat a determined central government in the 1980s, an era remembered above all for the militancy of the miners' strike, what chance is there now that two parties are combined in government?

There is, however, one big difference between then and now. Now, the reduction in living standards for individuals and families, the effective freezing or falling of wages and benefits for so many people, is accompanied by the massive reduction in what Barbara Castle used to call the "social wage". In other words, a substantial part of our population is now experiencing a double whammy.

On the one hand, their living standards are being drastically cut. On the other, the support services that normally allow them to survive, and to make their way in life, are being taken away. Alongside this, economic activity through spending power is also falling, and growth in the most deprived areas with it.

This time, the hidden truth of local authority cuts will eventually emerge. We are undermining the very basis of the kind of society that has protected us from the worst impact of previous recessions. That impact has not yet fully been felt. When it does, I fear that we will have one of two reactions: either the kind of widespread discontent and unrest that faced us in the early 1980s; or disillusionment, disaffection and general withdrawal, which reduces the chance of Britain being an innovative, forward-looking and equal society.

Either way, it is all of us who lose out.