The Department of Social Security announced last week that it was increasing the amount of fraud councils will have to uncover for 1996-97 by 50%.
The Association of District Councils said the target for all councils of £150 million would mean authorities would have to work harder to maintain the current level of subsidy that goes towards employing fraud detection teams.
The change could deter some councils from taking tough action to detect fraud.
'Local authorities will have to run fast to stand still,' said the ADC's assistant housing secretary, Paul Lautman.
'The government is saying it is committed to fraud but in effect it is reducing the contribution to local authority fraud investigation.'
The DSS has attempted to limit the impact of the change by increasing the amount of recovered money councils can keep, once they meet their detection target, from 20% to 25%.
But if councils fail to meet their target they will still lose subsidy equivalent to the shortfall.
Around the time of the Budget social security secretary Peter Lilley made great play of his plans to reduce benefit fraud.
But there is a fear the new target may force councils to abandon fraud detection initiatives altogether.
Councils have only recently started recruiting dedicated teams to tackle benefit fraud and recently won praise from the Audit Commission for making improvements in their anti- fraud policy (LGC, 14 December).
'By raising the target substantially the government is making it difficult for councils to invest in teams in the confidence they will bring in extra subsidy,' said Mr Lautman.'Many may feel the target is beyond them and will not increase resources going into fraud investigation.'