In just 12 weeks the chancellor, George Osborne, will deliver the spending review that will shape the future of our public services for a decade.

Councils are under no illusions about the significant challenge that lies ahead. The Local Government Association’s submission to the Treasury reveals that councils will face £10bn extra cost pressures by 2020 because of government policies, inflation and other factors – even before expected spending reductions.

For the spending review decisions to be sustainable for councils, the government must be aware of the scale of future pressures, and fully fund new burdens for local authorities.

For example, government proposals to reduce rents paid by social housing tenants by 1% over the next four years will see councils lose £2.6bn of revenue, which would have been spent on building thousands of new homes and maintaining social housing stock. Instead, we recommend the duration be reduced to three years and exemptions be introduced to protect investment in specialist homes for vulnerable people.

Councils will also have to set aside £1.75bn to cover the high volume of business rate appeals expected when the 2017 revaluation is opened. We believe the introduction of a new rating list in 2017 is a chance to improve the system: the government should work with councils to move to a self-assessment model of revaluations. This would be the biggest change to the business rate system for a quarter century, but it would bring the tax in line with other self-assessment taxes, such as VAT and corporation tax, preserve the right of appeal but minimise the financial risk councils face.

The spending review will rightly prioritise radical devolution of power within England. We are calling for the devolution of, or greater local influence over, at least £60bn of central government spending.

This will enable local areas to plan, integrate and deliver welfare support, employment, health and skills provision in line with local economic need. Councils will be able to gear the skills system – further education, adult skills training, support for the unemployed – towards employers’ demands, addressing unemployment and underemployment and closing skills gaps. This is essential for boosting national growth and productivity.

In our submission, the LGA is also calling for councils to be handed four-year financial settlements, to allow them to undertake the long-term planning essential to delivering efficient local services.

Satisfaction with local services remains high despite councils receiving 40% less core government funding than in 2010. But local government’s resilience cannot be stretched much further.

Councils hold the key to unleashing the full potential of local communities and relieving pressure on the exchequer. We need the spending review to hand us the fairer funding and powers to make that happen.

Sign up here for your free weekly Guardian Public Leaders newsletter with news and analysis sent direct to you every Thursday. Follow us on Twitter via @Guardianpublic