West Midlands councils should share chief executives and other top managers in order to save cash and fund their share of £5.6 billion in spending cuts, according to local government secretary Eric Pickles.
He warned that authorities would be expected to cope with cuts of more than a quarter of their budgets without damaging services.
It was time for town halls to face up to the need for efficiency savings which the private sector had already made, said Mr Pickles.
He was speaking after it was announced that funding for local authorities, police and fire authorities would be cut from £28.5 billion this year to £22.9 billion in 2015-15.
Money targeted specifically at councils is to drop by 28 per cent.
Mr Pickles said councils would receive £2 billion specifically for adult social care while funding for schools would also be protected, leaving authorities to make dramatic cuts in remaining budgets.
He said: “We didn’t protect Whitehall. We cut deep into the administration of Whitehall. And we’re not going to protect the town hall.
“But one of the greatest pressures on local authorities is adult social care, and we’ve seen money transferred, £2 billion, to deal with the pressures of adult social care. We have protected the most vulnerable.”
He added: “The days in which you can expect to enjoy your own chief executive, your own top officers, your own separate departments, are over.
“We expect you start merging your departments and having joint offices in order to protect those frontline services.”
Councils could merge departments with neighbouring authorities, he said.
“We are saying that people should be joining up their planning departments.
“We are saying that people should be joining up their education departments and planning finance departments.
“There is too much duplication at the moment.”
Officials in the Department for Communities and Local Government highlighted a programme in London councils including Kensington & Chelsea, Hammersmith & Fulham and Westminster to merge back office services and examine options for creating a single senior management team and chief executive.
They also admitted that councils would face “difficult but necessary decisions” about staff cuts.
But Mr Pickles insisted: “This is about stopping people losing their jobs.
“If we don’t do this, then there will be massive cuts in the public sector in the future. We do this to ensure we are in a stable position, to get us out of the danger zone.”
The Government’s £1.4 billion regional growth fund would stimulate investment and provide sustainable private sector jobs in areas which currently depend too much on the public sector to provide employment, he said.
He also defended plans to reform council housing so that tenants are removed from properties if their circumstances change and they no longer need cheap housing.
No existing tenants would be affected but the the Government would introduce new “flexible tenancies” he said.
It is set to provide £2 billion to create 155,000 new affordable homes, where the rent will be set at 80 per cent of market rates.
Councils would also be invited to borrow money to build more homes if they wanted.
“In order to halve the waiting list - I don’t mean to get rid of it, just halve it - if we continue to fund social housing the way we do now, we would need £50 billion of capital funding.
“Clearly, that is not going to happen, and nobody was ever going to do that.”
Mr Pickles also revealed that Birmingham was to pilot a new scheme allowing local authorities and agencies such as police and the NHS to pool the budgets they used to help deal with problem families and other social issues.