Whitehall departments fail to understand the impact their spending decisions have on local government, putting key services at risk, the head of the National Audit Office has warned.

Speaking at The MJ's Future Forum in London, Sir Amyas Morse said that while the Ministry of Housing, Communities and Local Government's (MHCLG) understanding of the sector has ‘improved significantly' in recent years, Whitehall's broader knowledge of how funding decisions effect local areas is less advanced.

In a candid speech on 27 April, the comptroller and auditor general also said councils could not continue to manage the level of cuts faced in recent years, and now had a ‘compelling' case to make to the Treasury for sustained funding to cover the soaring cost of social care and children's services.

Sir Amyas' intervention will inject fresh momentum into a local government sector lobbying hard to avoid further cuts when chancellor Phillip Hammond plans his next Budget and the 2019 Spending Review.

He told delegates: ‘Where I feel central government doesn't perform so well is in how it understands the funding needs of services. In other words, it doesn't really have as much insight into what services need in terms of support - what's the minimum needed to be able to deliver a service.

‘I think we need to push departments into thinking more about that.'

Sir Amyas acknowledged that there has been some progress in ‘pulling together' joint working across Whitehall departments.

‘Nonetheless, you tend to see initiatives taken by departments which affect local government and it's only after these are taken, and consequences for other departments are known, that there are efforts to draw it together. That needs to move forward,' he added.

He warned ‘there are risks to statutory services' where national policies are poorly co-ordinated or implemented locally.

The long-serving NAO comptroller urged health bodies, for example, to work closer with local government in designing long-term solutions to rising social care costs – in order to avoid inefficient emergency spending focused on resolving crises.

‘It's important that we design that relationship rather than [tackle it] through a series of shuffling, backward steps,' he told delegates.

Sir Amyas remained tight-lipped on which departments fail to fully understand their local footprint. But a separate, senior Whitehall source suggested the Department for Work and Pensions, Department for Education and Home Office are among the bodies which need to improve their understanding of how, once made, central spending decisions impact on local public bodies.

‘Sir Amyas' criticisms are well-observed. In the search for top-line savings, some departments have simply shunted costs or responsibilities onto local authorities – without the necessary funding,' the source told The MJ.

Jo Miller, chief executive of Doncaster MBC, said Sir Amyas' warnings ‘resonated strongly' with senior staff delivering local public services.

‘We're regularly seeing local government deal with the "law of unintended consequences" which can result from Whitehall policy-making,' she said.

Ms Miller claimed councils have suffered from ‘botch and fix' arrangements linked to recent Universal Credit, immigration and even some policing services.

‘Policy-makers in Whitehall need to understand that none of this happens in a vacuum – there is human misery involved.'

Addressing delegates before Sir Amyas' speech in London, Local Government Association chief executive, Mark Lloyd, warned that although the sector was working hard to convince ministers of the need for fresh funding pots after years of austerity, it was important councils did not simply approach Whitehall with a ‘begging bowl'.

He said local government must show it is an ‘investable proposition' providing solutions to key public policy issues.

Sir Amyas also warned councils to pay greater attention to early financial warnings provided by their auditors. He cited troubled Northamptonshire CC as an example of a council that received early warnings about its financial position, but failed to fully act on the advice.

‘It's fair to say that I'm concerned about the response I'm seeing to the audit activity,' he said.