One way to both cut costs and improve services might be to ask the local community to 'get involved':
Futures Forum: Volunteers in the community: 'doing jobs for free' or 'empowering communities to take local action'?
Another might be to 'redesign' local services:
Report: Restarting Britain 2: Design & Public Services | All-Party Parliamentary Design and Innovation Group
New Design Commission report: Design and Public Services - YouTube
Get creative: eight tips for designing better public services | Public Leaders Network | Guardian Professional
Role of social design in public services | Public Leaders Network | Guardian Professional
This is a report from a summit attended by local authority executives - looking at "how design-led thinking can help make them more effective and, importantly, efficient."