Birmingham City Council leader Mike Whitby has spoken of the “awesome” challenge the city faces from the harshest public spending cuts in decades.
New calculations suggest that city council budgets could lose up to £200 million over the next four years as a result of the Budget.
But the final figure may be even higher, Coun Whitby warned.
His comments came as it emerged that council bosses have frozen payments from a £400,000 community improvement scheme.
The city’s 40 ward committees have been stopped from signing new contracts for the Community Chest, which typically provides grants of up to £10,000 for a variety of organisations ranging from children’s reading groups and village halls to day centres.
The move is being described as a temporary block on spending while city officials take stock of the council’s financial position.
Coun Whitby (Con, Harborne) told the main scrutiny committee he was in “no doubt about the seriousness of the situation”.
He added: “We know there will be an average cutback in non-protected public services of 25 per cent in real terms and that the impact on local government could be higher than this.
“We will continue to develop further specific proposals to reduce costs and increase revenue streams where possible.
“This will be supported by further in-depth reviews of services, with a particular focus on value for money and the quality of outcomes for the people of Birmingham. We will reduce overheads in order to focus on frontline services.
“But the challenges we face are awesome.”
He said the council would continue to save money by handing responsibility for delivering some services to the independent and voluntary sector.
The council leader insisted Birmingham was in a better position than most cities to weather the financial storm.
Eight ambassadors from oil-rich Middle East countries will visit over the next few months to discuss investing in regeneration schemes in Eastside and the city centre, Coun Whitby announced.