An official report has warned that Britain should be prepared for a surge in domestic violence, alcoholism, drug addiction, and mental-health problems as the ‘second wave’ of the recession takes hold.

The Audit Commission has warned that local authorities are not doing enough to counter a wide range of social problems caused by increasing unemployment, business failures and bankruptcies.

It also adds that town halls should prepare to deal with public nuisances such as fly-tipping and stray dogs.

While most councils have taken some steps to support local businesses and help vulnerable families, the impact is likely to be limited and few are targeting their efforts effectively.

The Audit Commission has accused councils in some areas, particularly those which have escaped the worst effects of the recession so far, as being complacent. It said:

“Many councils should be doing more to prepare for the expected social, financial and economic development challenges ahead.

“This includes councils that have escaped the worst effects to date, some of which are complacent.

The commission warned that most areas were likely to experience deteriorating social problems including domestic violence, alcoholism, drug addiction, and young people unable to find work.

Councils are already experiencing an increase in demand for benefits, welfare, and debt counselling, while the pressure on social care and mental health services is also increasing.

There is also an increasing demand for state school places from families who could no longer afford to educate their children privately, and incidences of fly-tipping, abandoned cars, and stray dogs are all on the increase.

Councils were seeing their incomes fall, especially from a drop in planning fees and other revenues in the wake of the property market collapse at the same time as demands on them are increasing.

The Commission acknowledged that unemployment rose by 720,000 in the 12 months to June and is likely to go up by another 750,000 over the next 12 months, but few jobs have been lost in local authorities.

According to the survey of councils, 65%t of the larger authorities, metropolitan, unitary and county councils, have done nothing to reduce recruitment since the recession started, and only one in five have made any compulsory cuts in jobs.

Tory local government spokesman Caroline Spelman said:

“Rather than just creating additional tiers of expensive and unproductive public sector jobs, councils must focus on cutting waste and inefficiency.

“We need to protect frontline services like rubbish collections and care for the elderly, and then use efficiency savings to keep council tax bills down.”

The Audit Commission said that so far councils in the Yorkshire and the Humberside region have been amongst the hardest hit by the recession while those in the South West and Eastern England had been least affected.

Most authorities had taken sensible steps to try to minimise the effects of the downturn in their areas, but these are expected to have a limited effect.