The Home Office has denied it is about to scrap plans to merge police forces across England and Wales.
Cumbria and Lancashire police pulled out of merger plans
However, a letter sent by Ken Jones, president of the Association of Chief Police Officers, says all mergers "will not take place".
A Home Office spokesman did say there would be no enforced police mergers.
Former home secretary Charles Clarke said the "halt" of a voluntary merger between Lancashire and Cumbria forces would be "weak and damaging".
Those two forces, the only ones in England and Wales to voluntarily take part in the proposed mergers, said they were pulling out of the plans on Monday.
"It is likely to jeopardise the whole police reform programme and so will delay the introduction of neighbourhood policing throughout the country, to which we committed in our 2005 manifesto," Mr Clarke said.
Mr Jones' letter to all chief constables said: "The necessary financial support has not materialised and mergers, including voluntary ones, will not take place."
A Home Office spokesman said: "It is clear that they feel that there are some important issues still unresolved and want further dialogue. Ministers are happy to continue with these discussions."
The Lancashire-Cumbria merger was the only one of the five proposed by the Home Office to be approved by all the police authorities involved earlier this year.
A joint statement from the forces said they were not happy with the government's financial plan.
Their concerns were echoed by the Avon and Somerset Police Authority which said ratepayers should not be forced to foot the bill of force mergers.
Dr Moira Hamlin, chair of the authority: "We have grave concerns over the harmonisation issue.
"Essentially what this means is if, for example, all five forces in our region merged, you may find that people in Bristol are paying a different level of council tax towards policing services than people in Cheltenham, yet they would be receiving the same policing services from the same force."
A report by the Her Majesty's Inspectorate of Constabulary (HMIC) in September 2005, entitled Closing the Gap, found there were "significant weaknesses" in some forces' abilities to deal with major terrorist or domestic incidents.
"We remain committed to ensuring that police forces are capable of meeting the challenges of today while still providing dedicated local policing," it said.
The chairman of Cleveland Police Authority, Dave McLuckie, said he believed all merger plans would be scrapped.
He told the BBC: "If you can't merge the ones that want to voluntarily, then you're not going to be able to merge the others."
Mr McLuckie had opposed the creation of a North East police force, saying it would have cost £50m and led to "no improvement in services".
Shadow home secretary David Davis said: "It is clear that the government has woken up to the folly of its own proposals to regionalise our police forces.
"The government's approach of putting it back to consultation can only have one sensible outcome, namely that we junk the 'one size fits all' approach to our police forces and pursue an intelligent, co-operative, resource-sharing approach to mending the gaps in protective services."
Liberal Democrat home affairs spokesman Nick Clegg said: "Surely this is the nail in the coffin for the government's ill-judged and rushed plan to introduce regional police mergers?
"Government ministers should listen afresh to alternative ideas which meet the same objective of allowing our police forces to pool resources and tackle serious crime."