Fire authorities are reaching crisis point because of government funding cuts which could hit their ability to respond to future national emergencies, council leaders have warned.
The Local Government Association (LGA) said fire and rescue authorities in England and Wales were starting the new financial year with a third less money from central government than four years ago.
A further 10% cut is expected for 2015/16, leading to more "tough decisions" having to be made.
The LGA, which represents all 46 fire and rescue services in England and Wales, said the funding gap of a typical authority was increasing by £3 million a year and was set to reach £17.5 million by 2020.
A report said millions of pounds had already been saved by changing shift arrangements, cutting firefighter jobs, freezing recruitment and pay and cutting back office costs.
Kay Hammond, who chairs the LGA's Fire Services Management Committee, said: "Fire and rescue services continue to provide a first class service to their communities, as their performance in the recent extreme weather and flooding demonstrated.
"They have managed to avoid spending cuts impacting on critical services by moving towards a more efficient way of working while effective preventative work has resulted in a steady fall in the number of fires.
"Our modelling shows that further funding cuts in 2015/16 and beyond could start to impact on their ability to deliver this effective firefighting, rescue operations and community safety. The reality is that fire services are reaching the limit of efficiency savings and the next few years will be very challenging for them all.
"If fire and rescue services are expected to keep playing a key role in national resilience, then they must be given the funding to do so effectively. The government must also work with us to remove barriers to greater collaboration and mergers, to help drive innovations and by removing restrictions on setting tax levels locally."
The LGA called on ministers to protect local government from further spending cuts and to give more support to fire authorities considering merging or sharing services.
Options to close the funding gap included increasing council taxes, making further back office savings, cutting the pay of frontline staff, or reducing the number of firefighters and appliances.
A typical authority was "on the brink of a crisis", being "backed into a corner" by funding cuts, said the report.
A spokesman for the Department for Communities and Local Government said: "The independent report by Sir Ken Knight highlights the scope for the fire and rescue services to find millions in savings whilst safeguarding emergency operations and protecting public safety.
"In the last decade there has been a 46% reduction in call outs and incidents, and accidental deaths from fires in the home have reached an all-time low yet expenditure and firefighter numbers have remained broadly the same.
"Huge variations exist between how the 46 different fire authorities operate, with the cost per head of providing a service almost double in some areas to that of others.
"The report states that if those authorities spending above the average found ways to reduce their spending to the national average, then the money saved or reinvested could amount to nearly £200 million per year."
Matt Wrack, general secretary of the Fire Brigades Union, commented: "The LGA are right to say that fire and rescue services must be given the funding to play a key, continued role in national resilience.
"But it's clear that across the country cuts are already slowing emergency response times, impacting on critical services and endangering lives.
"All of us working in fire and rescue and local government must stand together to save fire and rescue services and convince central government to provide adequate funding for brigades.
"Merely creating a greater burden on local people by increasing council tax, reducing effectiveness by cutting cover at night or instigating further attacks on firefighters by reducing salaries after three long years of removing their pensions will not work."