The Evening Standard reports that the concerns from Surrey, which incorporates 11 boroughs, follow those of the 32 London councils, who believe they could lose up to£1.5bn over the next three years under the new system.
Surrey fears that it will be equally crippled by the loss of£15-20m of funding, and says the shortfall will mean a hike in council tax of between£189 and£243 for the average Band D home.
Mr Skellet said: 'This puts us in an impossible situation. How can we seriously be expected to deliver on the government's increasingly high expectations while being starved of the funds with which to do it?
Finance chiefs held a crisis meeting to discuss the impending loss of funding and warned that the council needs to spend£650m in 1999-2000 just to keep services running.
The government says it wants to treat all areas equally but councils in London and the south argue that the cost of living is greater here than in the north. In commuter-belt areas like Surrey, where there is a large elderly population, social services are already stretched.