Birmingham faces budget cuts of almost £170 million over two years after Treasury funding for the city council was slashed.
Local Government Secretary Eric Pickles insisted councils should be able to cope with the budget cuts without damaging essential services – if they axed back office staff, including senior managers.
He said the cuts were needed to put Britain’s finances back in order, keep interest rates down and prevent national debt escalating.
Central government funding for Birmingham will fall from £932.6 million this year to £827.2 million in 2011-12, a reduction of £105.4 million.
Mr Pickles said: “Before we see libraries cut and all these kinds of things, I want to see councils merge their back office functions.
“I would like to see them sharing chief executives, their legal department, their accounts department, their payroll, their IT, their planning, their education support functions.
“And when they have done all that, if they feel they have to close libraries, they should talk to me again.”
But the GMB union predicted the news would spark massive job cuts.
GMB national officer Brian Strutton said: “The job loss predictions will now become a reality with many more to come.
“The scale of cuts will be a devastating blow to council workers as local services are to be slashed.”
Birmingham City Council, which is consulting over plans which could cost 7,000 jobs, said it was examining the figures.
The authority’s 2011-12 figure includes a new grant of £15.4 million from the NHS to help the city provide social care. Without it, the total reduction would have been even higher.
It means the city’s grant from central government has been cut by 11 per cent.
Council tax receipts are likely to remain level at £332.8 million.
The Department for Communities and Local Government pointed out that Birmingham’s total spending power would be down by only eight per cent, once council tax receipts were included.
Birmingham faces more cuts in 2012-13, when total government funding, including the new NHS grant, is due to be £763 million. This is £169.6 less than funding for 2010-11
Council tax receipts are again expected to remain steady at £332.8 million.
Funding for Dudley will be down £9.5 million in 2011-12, bringing the council’s total budget including council tax revenues down by £3.39 per cent. And in Sandwell funding is cut by £23.7 million, bringing the total budget down by 6.71 per cent.
Solihull’s funding is cut by £6.1 million, bringing the total budget down by 3.49 per cent. Walsall’s funding is cut by £19.5 million, bringing the total budget down by 6.58 per cent.
Funding for West Midlands Fire Service will be down by £6.7 million, cutting its budget by 5.64 per cent.