Officials at the National Audit Office has said there are already clear signs of financial stress at councils after budget cuts worth on average 28 percent over four years, with further cuts pushing the total up to 37 per cent.
The auditors say they are increasingly concerned about local authorities’ capacity to make further savings, with cuts impact on adult and child social care.
The NAO says that while many council are coping so far, the concern is that further cuts will be very hard to find in local authority budgets.
And in an apparent criticism of the Government, today’s report adds that the Department of Communities and Local government has “a limited understanding of the financial sustainability of local authorities and the extent to which they may be at risk of financial failure.”
Amyas Morse, head of the National Audit Office, said: “The Department really needs to be better informed about the situation on the ground among local authorities across England.
“It should look for evidence of financial stress in local authorities to assure itself that they are able to deliver the services for which they are responsible.
“It should be clear about the knock-on effect of the various funding decisions taken by departments in Whitehall.”
Margaret Hodge, chair of the Committee of Public Accounts, said the report was worrying.
She added: “I find it extraordinary that the Department has little clue if local authorities are at risk of financial failure and whether the funding each authority gets is enough to meet demand for services.
“This is at a time when local auditors are unsure if more than half of authorities with social care responsibilities will be able to deliver their financial plans in the next few years.”
Shadow communities secretary Hilary Benn said: “This report reveals the true impact of the decisions David Cameron’s government has made, with housing and leisure facilities having taken the biggest hit.”
The Leeds MP added: “This also confirms that Cameron and Pickles have taken most funding away from areas with the greatest need, which is fundamentally unfair.
“It is now clear that an increasing number of councils are facing serious financial pressures, but CLG ministers are completely out-of-touch.
“That’s why the NAO has told them to start finding out what is actually happening in communities up and down the country.”
Last night Local Government Minister Kris Hopkins defended the Government, saying: “Every bit of the public sector needs to do their bit to tackle the deficit left by the last Administration, including local government which accounts for a quarter of all public spending.
“This Government continues to deliver a fair settlement to every part of the country – north and south, rural and urban, metropolitan and shire.
“The reality is since 2010 budgets have been balanced, council tax has fallen by 11 per cent in real-terms and public satisfaction with local government has been maintained.
“But there is still much councils can do to cut waste and make sensible savings, such as using their reserves, making better use of surplus public sector assets, clamping down on fraud, boosting council tax collection rates and sharing back offices.”