Services including children’s centres and pothole repairs are likely to become the focus of funding cuts over the next two years, council chiefs believe.

Warning that local authorities have reached the ‘end of the road’ for saving money through efficiencies, the Local Government Association (LGA) said many regions could soon be unable to fund all of their statutory responsibilities.

Government funding to town halls will have fallen by 40% by May 2015. Town hall chiefs now anticipate that money available to provide services such as running gyms, parks, libraries and youth centres is likely to shrink by two thirds by the end of the decade.

According to the LGA’s Under pressure report, 60% of councils claim either there will be no efficiency savings left to be made in 2015/16 or such savings alone will be inadequate to meet required cutbacks.

Almost half of local authorities said they were likely to use financial reserves as a short term fix to balance budgets and delay the impact of next year’s cuts.

‘Local authorities have strived to shield residents from the impact of cuts, but with another £20bn worth of savings to be found, we’re approaching a tipping point where options are fast running out,’ vice-chairman of the LGA, Cllr Gerald Vernon-Jackson, said.

‘Local government has led the way at improving and modernising the way we do things but further cuts will lead to fewer and poorer services unless Government commits to a new way of working. The clock is fast running down on Government’s opportunity to do this before the standard of popular services really start to suffer.

‘We need to find a better way to ensure public money gets to the frontline where it is most needed and doesn’t get lost in the maze of Whitehall. Otherwise we risk sleepwalking into a situation where an upturn in the economy coincides with a decline in public services.’