Councils are on track to make efficiency savings of 3.2 bn pounds over the past four years. This is 1 bn pounds more than the efficiency target they were set. The savings are equivalent to 123 pounds off the average Band D council tax bill. The new target is to save 4.9 bn pounds over the next three years. These savings can be used to reduce Council tax bills or invest in local services.

Local services have continued to improve in recent years. Last year, 79 per cent of all councils received either a good or excellent rating in the Comprehensive Performance Assessment, up from 66 per cent in 2006, and just 50 per cent in 2001.

Council tax collection is contributing to the increased efficiency and the latest figures show that the collection rate in England last year was 97.1 percent, up 0.2 percentage points on 2006-07, and 0.7 percentage points up on five years ago. Inner London Boroughs improved their in year council tax collection rate from 91.9 per cent in 2002-03 to 94.7 per cent in 2007-08, with Hackney, the most improved council, up from 79.5 per cent to 92.4 per cent.

Islington, Sandwell, Teesdale and Brent have also increased their in-year collection rates by more than 5 percentage points since 2002-03.

Councils will be supported in their pursuit of the new 3 per cent efficiency improvement target by regional strategies set out in Local Area Agreements. The key areas that have been identified for improving value for money are: re-designing services, sharing back-office functions, streamlining tendering processes to encourage more competitive bids and sharing legal advice.

Ministers are also considering a package of measures to improve local accountability to taxpayers on efficiency. This could include a requirement for councils to show on council tax and business rate bills how they have performed on delivering more efficient services and savings over the past year.