A £50m fund to ease the pressure of immigration on public services has been scrapped by the government without any publicity.

The migration impacts fund was set up Gordon Brown in response to local government claims that they needed central help to deal with unexpected pressure on housing, schools and hospitals.

It was funded by a £50 levy on the visas of non-EU migrants. The scheme was announced in February 2008, and funds could be sought by councils, police, primary care trusts and voluntary bodies.

The money – some of which was used to ease tension through appointing outreach workers after sudden increases in migration – was axed by the communities secretary, Eric Pickles. The decision has not been officially announced.

Officials at the Department of Communities and Local Government have described the fund as ineffective, but said they intend to continue with the visa levy. It is not clear how the cash will now be deployed.

A spokesman said: "Ending the ineffective migration impacts fund will save £16.25m this year. We believe the impacts of migration are better addressed though controlling immigration, which is why the government will reduce the level of net migration back down to the levels of the 1990s – tens of thousands each year, not hundreds of thousands."

The cancellation was announced in a written answer by Lady Hanham, a junior communities minister, which stated: "The purpose of the migration impacts fund was to alleviate the impacts of immigration on local public services, rather than to support migrants.

"In the light of the overall fiscal position the government concluded that it was not a priority funding stream."

Labour's shadow communities secretary, John Denham, said: "The fund helped areas which saw rapid changes in population from migration.

"Every penny was funded by a levy on migrants themselves, not the taxpayer. It is high risk to take away support which could prevent the stresses of migration boiling over into real community tension."

The fund was set up following pressure from police chiefs, local government heads and NHS executives concerned about immigration placing unexpected strain on schools and other services.

Funding went to a huge array of small-scale projects such as multilingual police community support officers and citizens advice bureaux.

Brown seized on the issue early in his premiership, pledging that newcomers would be made to pay into the fund to help local communities deal with changes in population. In its election manifesto Labour pledged to expand the scheme. Coalition ministers have now decided to cut it from next month.

The Local Government Association said it was aware of the decision, but did not wish to comment.