Councils will face a funding shortfall of up to £20 billion if the Government imposes cuts without reforming the way the public sector operates, local government leaders have warned.
The shortfall amounts to one-sixth of total annual spending by local government or the equivalent of more than the entire adult social care budget, said the Local Government Association (LGA), which represents 350 councils in England.
A spending squeeze on this scale would mean cuts to vital frontline services, the association warned in its submission to Chancellor George Osborne ahead of next month's spending review.
The LGA called for major reforms to give town halls more power to spend money as they see fit.
Ministers could save more than £20 billion a year without harming services if they approved the establishment of local budgets for public services, scrapped centrally imposed "ring-fencing", integrated health and social care policy and allowed pooled funding of local infrastructure projects, said the LGA.
The paper said that councils are facing a shortfall of between £12.5 billion and £20 billion a year by 2015 unless these changes are made.
On top of cuts of up to 20% in central Government grants expected as a result of the October 20 spending review, councils will face a £5.6 billion increase in social care costs due to the ageing population; an extra £1 billion for waste disposal; up to £220 million increase in the cost of pensioners' bus passes; and additional school spending because of the growth in numbers of primary age children, said the LGA.
Local government minister Bob Neill said the Government is "freeing local government from Whitehall red tape, slashing ring fencing and rolling back central government control".
He added: "The era of excess in local government is over and the LGA are right - the public will not forgive councils that make cuts in services before cutting down on wasteful spending, inflated wages and excess.
"Councils are moving in the right direction but there is still a fair way to go... We welcome the LGA's recognition of the pressing need to drive down the deficit and the commitment they have shown to working positively with us on this agenda."
