Hyndburn has been penalised by more than £120,000 – for not making fast and deep enough spending cuts.

Government bosses have refused to allocate the borough council the full portion of revenue available for demonstrating progress in cost-cutting through shared services.

The borough has received a £1.25 million efficiency support grant, available to seven local authorities who have seen a reduction of more than 8.8 per cent in their 'revenue spending power'.

An additional 25 per cent of the grant – worth more than £312,000 - was conditionally available, but the government has now told council bosses they will only receive 15 per cent.

Brandon Lewis MP, parliamentary under-secretary of state for local government, said the borough had not demonstrated enough progress in making savings.

In a letter to Hyndburn council leader Miles Parkinson, Mr Lewis said: “I am not content that you are going further and faster in your plans as outlined in the business plan you submitted to me in March this year.”

Coun Parkinson has claimed the borough has not received a full efficiency support grant as it is a Labour stronghold.

He said Hyndburn council is doing all it can to make savings and added that the decision by Mr Lewis needed a 'full explanation'.

Coun Parkinson added: “I will be looking closely at the other councils who receive this money and see if they get the full amount.

“We have made savings and we will continue to do so. I will be submitting our plans before our scrutiny committee for them to judge.

“We are working with Rossendale Borough Council and Lancashire County Council to share services were we can. We are also streamlining our management team. It will be interesting to see the pattern of cuts and where they fall. I think a lot of politics is going on here and where there are marginal seats there is less likely to be cuts.”

Conservative group leader Coun Peter Britcliffe disagreed that Hyndburn had received less of the grant as a result of being Labour-led.

He said: “It's absolute rubbish to say Hyndburn is losing out because it is a Labour council. There are plenty of other Labour strongholds that are not losing out. This council has got to get its act together to get every penny - it's disgraceful that this council has lost us the funding.”