The London mayor warned that authorities across the country faced a shortfall of business rate and council tax income.
In the capital that could mean cuts across the Metropolitan Police, London Fire Brigade, Transport for London and the Greater London Authority due to a shortfall of almost £500m (€558m) in funding.
Mr Khan is taking an immediate reduction to his £152,734 (€170,500) salary, cutting it by almost £15,300, and has frozen pay for his senior appointments at City Hall.
He said: “Londoners did the right thing to tackle Covid-19 by following the rules, staying at home and helping to save lives. But now the Government is punishing them with a new era of austerity.
“Covid-19 has had a devastating impact on London’s public finances which were in great shape before the pandemic.
“TfL’s fares income has dropped by more than 90% and local business rates and council tax income has fallen off a cliff.
“This is the worst possible time for a return to austerity – just when we need to invest in London’s recovery.
“Unless ministers act, the current number of police officers will need to be reduced and it will be impossible to tackle youth violence or make the changes to the London Fire Brigade that are desperately needed after the awful Grenfell Tower tragedy.”
The shortfall in tax receipts is due to a forecast reductions in the number of firms paying business rates and householders not able to keep up with council tax bills.
Mr Khan called on the Government to act on Mr Johnson’s promise that he would not return to austerity measures to balance the books as a result of the coronavirus crisis.
He warned that failure to act would jeopardise the British Prime Minister’s commitment to recruit 20,000 extra police officers.