The company's comments come following the Government's announcement of cuts in central funding for councils that could total up to 28% over the next four years. The average decrease for 2011/12 will be 4.4%, with no council losing more than 8.9% for any of the next three years.

The cuts, which are the worst to be faced by councils since the end of the Second World War, will come into effect from April 6, 2011.

According to Vincent St Claire, managing director of Alliance Asset Management, the cutbacks will mean that local authorities will have to completely rethink how they run their fleet operations, including reconsidering using outright purchase to find vehicles and reviewing rates used to reimburse employees' business mileage.

Mr St Claire said: 'The rule book by which the public sector has run its fleet and transport operations in the past must be ripped up.

'With some government organisations and councils owning hundreds of vehicles the quickest and simplest way to replenish financial coffers is to dispose of assets. The sale and leaseback of vehicles has been popular in the private sector for many years and there is no reason why the cash-raising solution should not take-off across the public sector.

'Not only will these organisations receive a much-needed injection of funds, but they will benefit from being able to exactly budget for their vehicle leasing costs on a monthly basis which will help cash flow.'

'By working in tandem with a leasing company, local councils will be able to benefit from information, advice and experience that will drive forward operating efficiencies resulting in additional financial savings.'

With regards to staff mileage rates, Mr St Claire said: 'Some organisations are paying far too much in mileage payment rates, thus giving staff an extra incentive to drive more business miles. 

'There is no doubt that with 2011 being the year of austerity, the public sector must, in many cases, reassess mileage reimbursement rates which remain far too generous. Not only do they not deliver value for money to the employer and local taxpayers but they are not in line with the nation's carbon-cutting agenda.'