Eric Pickles, the communities secretary, has threatened to use the law against councils that make "disproportionate" cuts to their 2011/12 voluntary sector budgets.
Some local authorities, including the Tory flagship local authority Westminster Council and the Labour controlled Manchester City Council, have announced deep cuts to charity funding in the forthcoming financial year.
The government has previously urged councils to avoid making deep cuts to charities so they can help to build the big society, but has emphasised it is up to councils themselves to make final spending decisions.
But Pickles told delegates at the National Council for Voluntary Organisations annual conference yesterday that he had "grave concerns" about some councils and was prepared to use "statutory force" against the worst offenders.
He said the government had "reasonable expectations" of how councils conduct themselves.
"It is reasonable to expect that councils will not pass on disproportionate cuts to local voluntary and community groups," said Pickles. "That they will not inflict bigger reductions to your budgets than they take on themselves."
He said it was also reasonable to expect councils to have discussed changes to services with charities "at a very early stage", to give three months’ notice of funding changes and allow three months for groups to suggest alternatives to cuts or ways of reshaping services.
"If councils are being high-handed, I’ll consider giving our reasonable expectations statutory force," he said.
"They must resist any temptation to pull up the drawbridge and pass on disproportionate cuts. And unless they’ve squeezed out every bit of waste, unless they are really sharing back offices and unless they’ve clamped down on senior pay, then there’s no excuse."
Martyn Lewis, chair of the NCVO, said Pickles had fired "one hell of a warning shot" to councils and asked how long councils had to respond.
"We’re not talking months; we’re not talking weeks," said Pickles. "We are talking about a short period of time. We have a piece of legislation capable of doing this, but I hope it won’t be necessary."
Asked by Lewis if his comments applied to councils that have already set their 2011/12 budgets, Pickles said: "Absolutely."
Kevin Curley, chief executive of the local infrastructure group Navca, said it would be "fabulous news for the voluntary sector" if legislation against councils making disproportionate cuts found its way into the Localism Bill, which is passing through parliament.
Ben Kernighan, deputy chief executive of the NCVO, said Pickles had sent "a clear message to local authorities that have already cut disproportionately to review their decisions".