TEST Valley Borough Council’s dire financial position is unprecedented this year because declining interest rates have hit its income, says council leader Cllr Ian Carr The upshot is that when the council’s cabinet meets tomorrow night (Wednesday) it will consider the possibility of compulsory redundancies among staff in order to balance the books.

“A significant part of the council’s income is from the interest we earn on our capital investments,” said Mr Carr.

“As interest rates have plummeted over the past couple of months, the likely cost to the council is now expected to be £1.331 million in the coming financial year.

“We have to find savings of more than that amount to balance the books.”

The report to the cabinet includes proposals to reduce the size of the organisation.

This means that where practical, vacant posts will be deleted. However, even this step will not produce enough savings, so the possibility of a number of compulsory redundancies is also proposed.

Mr Carr added: “It is too soon to talk about numbers.

“Once the cabinet has made its decision on January 28, then a formal process of consultation with the staff, in accordance with the council’s procedures, will ensue.”

Councils across the country have also been hit by a reduction in income from fees and charges levied on some services. One of the worst hit has been planning, which traditionally earns significant income from planning applications – but many authorities have seen this income stream diminish as the credit crunch chokes demand for new development.