Ministers could be preparing to increase the support available to councils that need to fund redundancy payments.
Communities secretary Eric Pickles said he was “actively reviewing” the amount of capital resource councils can use for revenue costs such as redundancy payments.
The Local Government Association has been lobbying ministers for an increase in the £200m capitalisation fund which was outlined in the spending review, arguing the total is inadequate for the level of redundancies that need to be made.
The body has estimated that as many as 140,000 local government posts may go over the next three years and calculated that the cost of redundancy could be anything between £1.5bn and £3bn over the same period.
Speaking to MPs on Monday about the cuts facing councils, Mr Pickles said: “I am actively reviewing the amount available for recapitalisation.”
It is not known if the outcome of the review will be announced with the financial settlements for local authorities, expected to be published next week.
Traditionally the capitalisation fund has been available for councils facing unavoidable, large costs such as redundancy payments or equal pay settlements which they would like to pay over a number of years.
The LGA has been calling on ministers to give councils the flexibility to decide for themselves how much capital money they spend on non-capital items and scrap the requirement for applications to Department for Communities & Local Government.
A spokesman for the LGA said: “If there is movement in that direction we welcome it.”
A DCLG spokesman said: “We will be publishing capitalisation guidance in due course.”