Derby City Council will cut all of its almost £750,000 a year non-statutory funding for voluntary sector groups after a challenge to the decision failed.
The local Citizens Advice bureau, which will lose £200,000 a year, said the move would force it to reconsider the services it offers.
The Labour-run council is removing all funding for voluntary sector groups that provide non-statutory services in the city – worth £747,595 a year – to help balance its budget after being subject to what it described as "savage cuts" to its funding from central government.
An attempt by three Conservative and three Liberal Democrat councillors in the city to "call in" the council’s proposal failed at a meeting this week.
A decision can be called in when councillors believe the council’s decision-making principles have been broken.
But the council’s overview and scrutiny board voted to not refer the decision back to the cabinet, with the board chair, Labour councillor Jack Stanton, using his casting vote.
Sue Holmes, chief executive of Citizens Advice Derby and Law Centre, which will lose almost a quarter of its income, said: "Derby City Council has continuously invested in Citizens Advice Derby, and we recognise that it is now faced with financial pressures that are leading it to make cuts.
"Although we have a number of funders, these cuts are significant to the service and we are reviewing how and whether we are still able to offer our advice services."
Matthew Holmes, leader of Derby City Conservatives and one of the six councillors who tried to call in the cuts decision, said the council’s policy was "very shortsighted".
He said: "We presented a very factual, non-political case as to why we felt the council has not fully considered the impact of cutting all of the funding to these groups and organisations.
"For example, there was no assessment carried out to properly understand and consider the impact of the complete removal of funding.
"We think it will soon become clear that the demand on other council services because of this will cost more than the saving they are trying to make.
"It’s very shortsighted and a very sad day for all of the organisations involved, especially for those who rely on them for support in Derby."
The authority said it had been forced into making the reductions because of "savage cuts" to the funds it receives from central government.
Martin Repton, the cabinet member for integrated health and care, told Third Sector when the council’s decision was called in that the financial situation meant it had to make cuts in areas "we would never normally have looked at".