By Alex Stevenson Follow @alex__stevenson
Council leaders are attacking Whitehall's model of departmental funding as outdated, as they demand greater use of community budgets.
The Local Government Association (LGA) is also calling for more use of payment by results schemes as it demands Whitehall change its structures to cope with the changes.
It says greater diversity in the provision of public services and new ways of funding them means legislation like the Exchequer and Audit Departments Act 1886 - which set up the Commons' public accounts committee watchdog - needs updating.
"The 19th century departmental approach to organising public services in Whitehall needs to change, if services are to be taken to the next level and address complex issues while also finding savings," LGA chairman Sir Merrick Cockell said.
"Having been given unprecedented spending cuts of 28 per cent, councils and local agencies are pressing ahead and making structural changes happen locally.
"Now it is the turn of Whitehall, which has so far been relatively shielded from the spending cuts.
"We need a shakeup of the ways government departments are currently organised to ensure they meet the needs of 21st century public services."
Parliamentary control and scrutiny of public spending were weak until William Ewart Gladstone championed a series of reforms in the 1860s.
He created the positions of comptroller and auditor-general and established an exchequer and audit department account to support them within the civil service.
The Commons' communities and local government committee is launching its inquiry into community budgets later today.