"We have clarified the intention of the Government's policy on public sector pay, as announced in the Chancellor's budget statement, and its implications for local government, " says the letter from the employers association's chief negotiator, dated 8 July.

BBC: Council workers 'betrayed' by pay freeze

In future, councils may have to work within a fixed budget, set by the Department for Communities and Local Government, for council tax benefit.

BBC: Ministers plan to cap council tax benefit pot

The Scottish government will not know its budget for next year - or how much it may be able to offer local authorities - until the results of the UK government's comprehensive spending review in October.

BBC: Senior SNP councillor backs council tax rise

The troika chiefs are concerned tax revenues will be lower than forecast, and that the budget still leaves space for spending overruns by the defence and health ministries and in local government.

ECONOMIST: Greek politics