Mr Hague denied he had made firm arrangements to meet the Welsh Local Government Association, but stipulated the association would have to call off its boycott of talks with the Welsh Office before a meeting could take place.
The WLGA, which spoke on its formation in April of forging positive new relationships with central government, had hoped to reach an agreement with Mr Hague on Monday which would enable it to resume talks with officials.
Instead, it wrote a letter to the prime minister asking for his intervention in the dispute.
Paul Griffiths, assistant secretary of the association, described Mr Hague's position as 'neither particularly sensible nor statesmanlike'.
Local authority leaders could only assume that Mr Hague had misjudged the situation and cancelled out of fear he could lose face by holding the meeting.
However, a memorandum sent to Mr Hague last week in advance of the meeting was 'a most conciliatory document', said Mr Griffiths.
David Lloyd Evans, leader of Cardiganshire CC, this week criticised the WLGA's position and called for the boycott to be abandoned.
'If you want to achieve anything, you need to talk to the Welsh Office. They can make good decisions without you if they choose to do so,' he said.
The boycott, announced in April in protest at this year's financial settlement, extends to all meetings between the Welsh Office and councils.
Most critically, the WLGA will now have to prepare its assessment of 1997-98 spending needs in isolation from the Welsh Office. It is also committed to conducting a longer-term review of the grant distribution formula - alone, if need be.
Mr Hague said the LGA's behaviour was 'ill-judged and most certainly does not serve the best interests of the people of Wales.'