Half of councils planning major job cuts

With local government accounting for about 10 percent of gross domestic product, according to the joint KPMG/Total Politics study, the upcoming funding cuts are significant for the economy.

"Reductions in Whitehall funding to local governments in England and Wales could be in the order of 15 percent in real terms, the toughest squeeze on council finances in the post-war era," Iain Hasdell, UK head of local government at KPMG, said in a press release.

Nearly half of all council leaders said they would have to cut spending plans drastically and were unsure how they would maintain service levels, the survey showed.

A majority also said that increasing efficiency would be one of the biggest challenges.

The country is due to hold a general election within a year and ways to rein in a budget deficit set to rise to 12 percent of GDP this year will be a central issue. Experts say cuts in spending in real terms are inevitable whoever wins power.

For 10 years, increasing cash levels have allowed council leaders to avoid taking difficult decisions needed to streamline their management layers, pensions and shared services, the report said.

"Now the challenge is to dramatically reduce the cost of local government and at the same time to transform its levels of productivity - an exactly opposite direction of travel," Hasdell said.

(Reporting by Paul Lauener; Editing by Victoria Main)