THE quality of council services has significantly worsened, according to a Government watchdog.

After earning the maximum rating (four stars) by the Audit Commission last year, the authority has now been given just two stars by meeting minimum requirements in most areas.

The findings of the Comprehensive Area Assessment (CAA), a new rating system which takes into account how well authorities work with other public bodies, will cause further alarm at the Town Hall.

The council has recently been rocked by further criticism of its widespread mismanagement of contracts.

Despite the scandal, the authority achieved its highest score, three stars, for its handling of finances.

In a passing reference to the fiasco, the report refers to the need for better scrutiny and governance.

However, the authority has been criticised in a number of other key areas.

The report said the number of teenage pregnancies are too high, childcare is not consistently good and too many children live in poverty.

It also found behaviour in secondary schools is worse than in other areas, too many children feel unsafe and not enough pupils perform well at every stage of schooling.

But a high proportion of secondary schools are classed as good or outstanding, compared to other boroughs.

While the report says the council is working well to improve town centres, it is critical of the delay in redeveloping the Arcade site in Walthamstow.

The report said: “This is a significant disappointment for local people who expected to benefit from more prosperous town centres and improved facilities.

“However, the council has developed the site in a way that enables a temporary space to be effectively turned over to local people for their use and enjoyment.”

Despite the much-publicised Wipe It Out campaign against 'envirocrime', public satisfaction with cleanliness of public streets is below the London average, the report says.

Too many people live in temporary accommodation and the condition of public housing is worse than other areas, but improving.

The report praises the council for making savings and delivering “value for money” while preparing well to take advantage of opportunities from the Olympic games.

Cllr Matt Davis, Conservative group leader, said: “The truth is, as the residents knew all along Waltham Forest was sadly never really a four-star authority.”

He added the council achieved the four stars for 'box-ticking' under the previous Audit Commission inspection regime, which has this year been replaced by CAA.

CAA, which is made by six watchdogs, takes into account how well councils work with other public bodies.

The council leadership has promised to address services criticised by the Audit Commission and continue to improve things the authority does well.

Welcoming the Watchdog’s report, council leader and Labour member Chris Robbins said: “We welcome the Audit Commission’s findings and will act where they have identified shortcomings in some areas of our work such as the quality of support given to independent childminders and the way the council scrutinises some aspects of its work.

“The Audit Commission noted improvements in the performance of secondary schools, our work with the police to tackle crime and care for the elderly.

“We are proud of what has been achieved in recent years. We are well aware however that some of our services need to improve a great deal.

“Ultimately the test of our performance will be views of our residents on the quality of the council’s services and, if this is reflected in our next Audit Commission rating, so much the better.”

The council’s deputy leader, Liberal Democrat cllr John Macklin, said: "The Audit Commission have identified a number of areas for improvement for children services and the way the council manages contracts.

"We will act on the issues highlighted by the Audit Commission today, and the Independent Panel last week, in order to deliver better services for our residents."