In an interview with The Daily Telegraph (p9), treasury chief secretary William Waldegrave said such a move could undermine his efforts to keep control of public spending and make room for tax cuts in next month's Budget.
'It would seem odd to be giving greater freedom to a lot of high-spending councils just at this moment when it is crucial for the country we restrain public spending,' he said.
More than 40 motions urging the government to give councils a free reign on spending have been tabled at this week's Conservative annual conference.
'It is rather obvious that the profile of public borrowing is not as good as we hoped, so the environment has become more difficult for the public finances. But there is nothing that cannot be handled,' he said.