TEST Valley Borough Council has lost around 10 per cent of its projected income for the next year following the collapse in interest rates.

On Wednesday evening glum faced cabinet members agreed to send officers away to chop almost £2 million from their budget plans – a move that will almost inevitably result in job losses, increased charges and reduced activities.

For many years the council has enjoyed the income generated from good rates of interest on £61 million invested largely from the proceeds of the sale of the borough’s council houses.

Last year investments provided £2.7 million towards the £17.5 million cost of Test Valley’s services.

Cllr Peter Giddings, the economic portfolio holder, said: “To achieve a balanced budget £1.87m has to be found – this is unprecedented.

“I have been involved in the budget of this council for 25 of the last 32 years and we have never had a situation like this.”

Mr Giddings said every one per cent drop in interest rates would lop £600,000 from the council’s income and between 1 October last year and 9 January this year the rate of return the council could expected crashed from 6.25 per cent to 2.25 per cent.

Officers have been told to return to cabinet on 18 February with their plans to bridge the £1.876 million budget gap, which could widen if rates fall further.

Cllr Caroline Nokes said: “This will be very tough for the council and it will be a great struggle to find these savings but we have no choice.”

Other councils around the country have been less hard hit than Test Valley.

A response as to why so much money was held in short term investments was awaited as the Andover Advertiser went to press.

However Cllr Mark Cooper confirmed that investment decisions are now taken ‘in-house’ rather than by outside specialists.