A £5.8bn funding shortfall by 2015-16 will leave council finances on a “knife edge”, the LGA has warned.
The association calculated councils would need the sum to maintain current levels of services based on the total budget of £46.3bn available next year.
Research published by the LGA today suggests councils have to save the equivalent of 12.5% of their budgets by April 2015 to meet rising costs and account for reduced government spending.
The analysis warns the amount of resources spent on social care and waste spending will reduce funding for other councils by 43% by 2019-20.
It also predicts core council funding will have reduced by 40% by the end of the current parliament, on top of a real terms loss of £3.7bn in council tax revenue.
Outgoing LGA chair Sir Merrick Cockell (Con) called on councils to urgently implement reforms of older people’s social care to ensure part of the funding gap could be recovered.
He said the better care fund, which will see councils and health services pool at least £5.4bn to improve adult social care from April 2015, was “a once-in-a-generation opportunity to both improve the quality of life for people in their older years and steer England’s social care system away from the road to financial ruin”.
“Council finances are on a knife-edge and the old way of doing things – including the way we care for our elderly population – just won’t work anymore,” he said.
“The joined-up approach between councils and the health service will provide better support for less money, by cutting out the cost of failure.
“Failure to get this right would be catastrophic for an entire generation who rely on care and the NHS. It will also deprive millions of the popular local services like buses, parks, libraries and leisure centres that help improve quality of life and bind communities together.”
Local government minister Brandon Lewis rejected the LGA’s claims, calling them “doom laden” and “alarmist”.
He suggested councils could make savings in other areas, by “tackling the £2bn a year of council tax left uncollected, the £2bn ignored or lost from fraud, the £2.4bn of surplus properties left dormant and [using] the £19bn piled up in reserves”.
He said: “Councils account for a quarter of all public spending so they must continue to play their part in reducing the deficit. This means councils must all make that extra effort to spend taxpayers’ hard-earned cash ever more wisely.”
The LGA based its financial forecasts on 2015-16 finance settlement data, its own projections of demand and inflation pressures, and Department for Communities and Local Government local authority revenue expenditure and financing data for 2013-14 budgets.
* Councils in Wales have been warned to plan for cuts of up to 4.5% next year, despite having originally been told reductions of only some 1.5% were due.
The Welsh Local Government Association blamed the NHS for eating into the budget for other public services.
Local government minister Lesley Griffiths outlined the deeper cuts in a letter to councils.
WLGA leader Bob Wellington (Lab) said: “With the NHS continuing to draw down ever greater levels of finance, this squeezes everything else. I spoke openly last week at the WLGA conference that at this rate local government will become an empty vessel, and services treasured by the public will be wiped off the map.”