Chancellor Alistair Darling's ‘recession-busting' pre-budget report is far from a giveaway for cash-strapped councils.

Under the plans, councils face a hike in payroll costs from increased national insurance payments, will see revenue from charges drop, and new uncertainty over business rate returns. Even the VAT reduction to boost consumer spending will impact on council coffers.

LGA finance experts are calculating the impact of Mr Darling's decision to increase NI contributions for employers and employees after the next general election. A senior LGA source confirmed the annual cost from 2011 was likely to be ‘somewhere in the region of £130m – possibly higher'.

Mr Darling's decision to postpone the implementation of higher business rates for empty commercial properties until 2010 also means councils will collect £1bn less in taxes. These rates are paid into Treasury coffers and shortfalls are usually covered by the Revenue Support Grant, but tightening Whitehall finances will leave councils nervous about the Government's future RSG allocations.

The chancellor's decision to reduce VAT from 17.5% to 15% until 20 10 will mean councils may have to recalibrate parking meters, for example, and adjust fees for other services.

Local government minister, John Healey, this week said that any additional cost increases resulting from the PBR would not be met by new grant allocations. Mr Healey confirmed on 26 November there would be no change in the planned finance settlement for councils next year.

Commenting on the future rise in NI bills, Mr Healey said it would be ‘for local government to manage, just like everyone else'.

He also revealed councils had made efficiency savings of more than £1bn in the past year. However, he claimed this would not be enough to meet their three-year target, and they would have to up their game. The UK's ‘economic pressures should concentrate minds more,' he said.

Despite rising wage costs, councils still stand to benefit from other PBR measures.

Mr Darling has brought forward £3bn of capital investment projects in schools (£800m), social housing (£775m), motorways (£700m) and energy-efficiency projects (£535m). The money was due be spent in 2010/11.

Mr Darling said: ‘I have looked at these programmes in detail and I know they can be delivered on this revised timescale. It will put people to work, renovating infrastructure, modernising schools and creating more fuel-efficient homes.'

A Treasury spokesman said the programme ‘will ensure local and regional economies receive an economic boost during these tough times, easing pressures on local authorities'.