GOVERNMENT cuts are forcing local authorities to reduce public services, a financial watchdog has warned.

Authorities had coped well with reductions in government funding, but some groups of councils were showing clear signs of financial stress, said the National Audit Office.

The NAO published its assessment of the Financial sustainability of local authorities 2014 on Wednesday (19 November).

The Department for Communities and Local Government had a limited understanding of authorities' financial sustainability and the impacts of funding cuts on services, it warned.

The government will reduce its funding to local authorities by an estimated 28% in real terms between 2010-11 and 2014-15.

Further planned cuts will bring the total reduction to 37% by 2015-16.

Although there have been no financial failures in local authorities in this period, the NAO said a survey of local auditors found that authorities were showing signs of financial pressure.

More than quarter of single tier and county councils - those authorities responsible for social care and education - had to make unplanned reductions in service spend to deliver their 2013-14 budgets, it said.

Auditors are increasingly concerned about local authorities' capacity to make further savings, with 52% of single tier and county councils not being well-placed to deliver their medium-term financial plans.

National Aufit Office head Amyas Morse said: "Local authorities have worked hard to manage reductions in government funding at a time of austerity.

"At the same time, there is evidence of some service reductions.

"The department really needs to be better informed about the situation on the ground among local authorities across England, in a much more active way, in order to head off serious problems before they happen.

"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."