SPENDING by North-East councils is predicted to fall by five per cent this year - the biggest drop in the country, analysis shows.

The research of Government data was conducted by the Chartered Institute of Public Finance and Accountancy (CIPFA) which said its report highlighted the need for urgent reform of local authority financing.

According to CIPFA, North-East council planning departments - 13 per cent drop - and housing - 12 per cent - are expected to see the biggest budget reductions in 2014/15.

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Education, environment and cultural services are also predicted to face significant spending cuts.

CIPFA said some of the fall in education spending was likely to be due to schools converting to academies, removing their funding from local authority control.

Adult services were expected to see an average four per cent drop in funding, but children's services were predicted to see a 15 per cent rise.

The reduction in expenditure comes after the North-East was the only area to see an increase in local authority spending during 2013/14, CIPFA said.

The analysis showed that nationally local authorities' per capita spending in England will have fallen by 14 per cent in cash terms by 2014/15, when compared to 2009/10.

When adjusted for inflation this represents a drop of 29 per cent fall, which CIPFA described as a "significant reduction in the spending power of local authorities in England".

Rob Whiteman, CIPFA chief executive, said: “The continued sharp downward trajectory of local authority spending in both cash and real terms shows the significant financial challenge councils have faced over the past few years.

"Many authorities have managed this reduction well and continue to live within their means, but we are now starting to see some councils face real and immediate financial pressures."

Mr Whiteman said that to prevent the financial failure of vulnerable local authorities, it must be recognised that some councils had been hit harder than others.

He added: "It must also be recognised that there is a real and pressing need for fundamental reform of the financing of local government if we are to see it not just survive but succeed and thrive over the coming years.”