Sharing services and other efficiency measures could save councils in England £140 million a year, according to a report published today by the Audit Commission.

The savings, which could be achieved by councils in a number of ways, far exceed the efficiency target of £75 million a year over three years set by the government.

"Savings of this order could help councils minimise pressure on frontline services such as education and social care," said Commission chairman, James Strachan.

Some £70 million, equivalent to half of the potential savings could come from London boroughs relocating back-office staff outside the capital, said the report, entitled The Efficiency Challenge.

The report shows some councils are already taking action to improve efficiency by using a range of initiatives including partnership working.

English councils are responsible for collecting over £18 billion of council tax, and they pay over £13 billion in housing and council tax benefits. They spend £1 billion each year on collecting revenues (council tax and business rates) and processing benefits (housing and council tax benefit claims).

The Commission visited over 30 councils and analysed data from the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Office of the Deputy Prime Minister (ODPM). The report found the potential for savings of £140 million a year, a saving of 4.2% of the £1 billion council spend.

The report also contains examples of how these savings can be made. Two district councils have each saved over £100,000 a year since combining the operation of their council tax collection and housing benefit administration services. And London councils, which have higher costs, could make considerable reductions by relocating back office functions outside the capital.

The report identifies a number of factors that contribute to higher costs, such as high staff turnover, old IT systems, backlogs and using temporary staff. The study also finds that those councils prepared to be more innovative in delivering services can make considerable savings without lowering the quality of services.

Partnership working offers councils the greatest potential for making efficiency gains. While there are barriers to change, case studies in the report highlight the benefits of sharing services with other councils, or through the private sector.

The report acknowledged there was no "one-size-fits-all" answer to cutting council costs, but said that all authorities should consider whether to adopt innovative methods and set clear goals for improvement.