The Communities and Local Government department has published new guidance for councils that says they should not make disproportionate cuts to voluntary and community groups.
The provision is in the department’s new "best value" guidance, a single-page document that replaces a 56-page set of guidance introduced by the Labour government.
The new document says local authorities "should seek to avoid passing on disproportionate reductions by not passing on larger reductions to the voluntary and community sector and small businesses as a whole, than they take on themselves".
The new guidance also says councils should consider social, economic and environmental value when commissioning services.
"As a concept, social value is about seeking to maximise the additional benefit that can be created by procuring or commissioning goods and services, above and beyond the benefit of merely the goods and services themselves," it says. "Under the duty of best value, therefore, authorities should consider overall value, including economic, environmental and social value, when reviewing service provision."
It says councils should give at least three months’ notice to voluntary groups and small businesses, and their users, if they intend to reduce or end their funding. Councils should also consult these organisations and their service users about the impact the funding cut will have on the local community, it says, and should give the groups the chance to propose ways to reshape the service.
The new guidance also says local authorities have a compulsory duty, when commissioning and decommissioning services, to consult "those appearing to the authority to have an interest in any area within which the authority carries out functions".
It says councils must also consult representatives of council tax payers and service users, and should include local voluntary and community groups in this.
In a foreword to the guidance, communities secretary Eric Pickles says all central government departments will also sign up to the standards in the guidance.
Pickles’ foreword also says: "In terms of the reductions package to local authorities, they are a reflection of the circumstances we inherited when we came to power.
"And the reductions package does not mean that councils cannot support the voluntary and community sector and small businesses."
The foreword says the Communities and Local Government department has revoked several pieces of guidance, including its two-tier code on workforce matters in local authority service contracts and the guidance document Creating Strong, Safe and Prosperous Communities, which included advice on commissioning.
When the department opened a consultation on the guidance in April, a spokeswoman told Third Sector local authorities could be taken to judicial review if they did not comply with it.
A spokesman for the Communities and Local Government department was this morning unable to comment on whether local authorities would face sanctions if they did not comply.