Council leaders are pressing employment secretary Michael Portillo for a meeting after officials revealed councils would be allowed to bid for £22.6m next year compared with around £34m last year.
Further education colleges, which were taken out of council control last year, will be worst hit with their allocation from the European social fund, under the EU's objective three criteria, falling from £66m last year to 52.6m next year.
The government's training and enterprise councils will receive £18m direct from the European Commission compared with £13m last year. The employment department has also managed to protect the £197m it receives from an overall cut in objective three funds, according to figures compiled by the Local Government International Bureau.
'We'd expected a cut,' Jos Gallacher, LGIB assistant director, Europe, told LGC. 'But this is way below what we thought we would get.' The least he thought councils would receive was £30m.
Delays in receiving ESF money meant some councils had been keeping projects going without matching grants, Mr Gallacher said.
'The delay in receiving ESF has caused a crisis in training in the UK which would be much worse if local councils had not decided to take the risk of keeping training running.
'The employment department is now using the pressure of time to force partners to accept a cut in their allocation. Over £38m has been spent by local authorities in the expectation of funds later.'
For this reason there may be some hope that councils will pick up more than their ESF allocation. Because councils have been able to keep training projects running in the past without the certainty of European aid, they have tended to take on projects which voluntary organisations could not afford to maintain.
Last year councils and FE colleges began with an allocation of £83m but actually spent £103m.