The Local Government Association has criticised the communities secretary, Eric Pickles, for saying he could use the law to prevent councils from cutting their voluntary sector budgets disproportionately.
Speaking at the NCVO annual conference in London on Tuesday, Pickles threatened "statutory force" against councils that cut voluntary sector budgets by a greater percentage than their overall cuts or do not give three months' notice of funding changes.
His comments were warmly welcomed by voluntary sector leaders. But Richard Kemp, vice-chair of the LGA, said Pickles' views "failed to recognise reality" and ran contrary to the spirit of localism.
Kemp said charities were not exempt from local authority cuts, particularly when some were caused by the loss of central government contracts for services provided by voluntary organisations. Kemp named the Supporting People programme, which helps vulnerable people at risk of going into care to remain at home.
"Talk of introducing a statutory three-month notice period fails to recognise this reality and runs contrary to the spirit of localism," said Kemp.
Rachael Maskell, national officer for the not-for-profit sector at the trade union Unite, accused Pickles of living in "a fantasy world".
"The cuts to local groups are happening now and are very severe," she said. "Eric Pickles' unreasonable funding settlement to councils has contributed to this crisis.
"There is no strategic funding plan for the sector, and barely any crisis management."
Steve Wyler, chief executive designate of Locality, the charity being formed by the merger of community organisations Bassac and the Development Trusts Association, said Pickles' announcement did not go far enough.
"Why does central government not practise what it preaches and announce with immediate effect a 'right to reshape cuts moratorium' for all government departments contemplating cuts to third sector organisations?" he said.
The proposal would provide a minimum three-month moratorium on cuts to voluntary organisations, giving them time to explore ways of considering new approaches to delivering local services, said Wyler.