A new inquiry into local government finance will take place ahead of this year's Spending Review.
The Housing, Communities and Local Government Committee will explore how effective existing funding for local government is in providing resources to meet need and demand for services.
Chair of the committee, Clive Betts, said: 'We have launched this inquiry to understand the impact of the current arrangements for funding local government services and the effect this has in different areas with different challenges and demands, the total local funding and how this is calculated.
'We will also investigate how the Government arrives at its spending decisions and what mechanisms are in place to assess local need.
'Our aim is to provide constructive recommendations that can feed in to the upcoming Spending Review to provide a fair and effective funding system to support the provision of local services.'
Chief executive of the LGiU think-tank, Jonathan Carr- West, said: 'Time is of the essence.
'Local councils are in a precarious financial situation - selling off valuable community assets and cutting services to stay afloat, with no idea how they’ll be funded from next year.
'The committee needs to move fast to make sure their recommendations are heard by Government before it’s too late.'