The Audit Commission's report, 'Paying the Piper', published today, says the cost of local authority white collar staff increased by 85% between 1987 and 1993.
Councils will have to make cuts in services unless they save money by improving productivity, cutting back top heavy management, and introducing performance pay, the commission says.
But unions say the report's call to cut the pay bill is an incitement to breach national agreements, Today reported.
'This is not what we had anticipated to happen and it raises major questions for councils when the government is saying they're going to reduce council expenditure', Mr Foster said.
But Rodney Brooke, secretary of the Association of Metropolitan Authorities, said in that period councils had cut 110,000 staff.
'Since then they've made even sharper cuts', Mr Brooke said. 'Councils all over the country are cutting management and trying to preserve frontline services.'