Confirming councils will receive£73.1bn next year - a 4.2% funding increase - the local government minister said he had written to councils warning that government was ready to repeat last year’s capping action.
“I expect next year’s average council tax rise to be substantially below 5% and I will not hesitate to help people by capping any excessive increase if I have to," Mr Healey said.
“Councils are facing tough budget decisions like the rest of government but people rightly expect us all to tighten our belts. However any steps to make efficiency savings must maintain or improve vital local services that communities need.”
Portsmouth City Council and seven police authorities were all threatened with capping action last year for excessive rises in council tax levels or budget requirements.
Total formula grant for 2009-10 will be£780m or 2.8% higher than in 2008-09 on a like-for-like basis.
Specific grants, such as the Dedicated Schools Grant bring the total increase in funding for local authorities to 4.2% in 2009-10.
“Many councils are facing their most difficult budgets for years,” said Steve Freer, chief executive of the Chartered Institute of Public Finance and Accountancy.
“The impact of the recession on local authorities brings its own significant financial pressures, not least some services facing increased demand and others experiencing falling income.
"The challenge for all councils will be to drive efficiency savings as hard as possible to bridge the budget gap and to minimise the far less palatable option of cuts in services.”