THERE will be no compulsory redundancies or huge rises in Council Tax to cover the £900,000 budget shortfall facing West Somerset District Council as a result of plummeting interest rates.

That was the message at Monday night's cabinet meeting as councillors agreed the authority would have to go back to the drawing board to plan for the future.

The three-year plan, which details all the authority's forthcoming projects, will have to be rewritten and council managers have been asked to find savings within each department.

But deputy leader and portfolio holder for finance, Cllr Colin Hill, moved to allay fears of job cuts and tax rises.

He said the three-year plan had served its purpose by alerting the authority at the earliest opportunity to the problems that lay ahead.

"We have taken considerable action already that has helped, but since the September 11 attacks we have noticed that, even if we are not on the brink of a recession, we are somewhere near it.

"Every quarter per cent cut in interest rates costs this authority £61,500 in lost income on investments.

"We need to take stock to make sure we can balance our books but it is not the intention of this authority to have compulsory redundancies or to try and buy our way out of it by putting up Council Tax," Cllr Hill said.

He said many West Somerset residents were already in a similar situation to the one faced by the council as their income from savings and investments had dropped with each cut in interest rates.

Council leader Cllr Steven Pugsley said the problems facing West Somerset had been caused by a global situation and said "prudent management" was the key to surviving the crisis.

"We have to rewrite the three-year plan to make sure we are living within our means and still providing the services we have to," Cllr Pugsley said.

He also agreed with suggestions that the council should lobby central Government for financial help once the new plan had been written.

Assistant chief executive Rod Latham said: "Government rules and regulations severely limit our ability to take appropriate action, even when problems can be foreseen.

"In such cases, councils are normally fully or partly compensated via the revenue support grant.

"However, in this instance, the distribution system is not sophisticated enough, nor is West Somerset large enough, for the problem to be picked up and dealt with."

He added: "This is clearly neither fair or correct and consideration ought, therefore, be given to bringing the issues to the attention of the Department of Transport Local Government and Regions and seeing if they can do anything constructive to help."

He told councillors the three-year plan had not been designed to cope with the current "unexpected and unprecedented situation" as interest rates were now at their lowest for more than 40 years.

He said unit managers had already identified annual savings amounting to some £230,000 but more "substantial savings" still had to be made.

Cllr Hill said the main targets would be capital projects which would ultimately save the council money within its revenue budget.

However, Cllr Pugsley said the council's planned move to Minehead was not one of them.

"That is a capital project which is designed to save revenue so it will become even more imperative that we do it rather than knocking it on the head," he said.

The new version of the three-year plan will be discussed by cabinet members at their next meeting on January 14.

In a statement, council chief executive Tim Howes said the authority was well placed to deal with the situation and praised the flexibility of the three-year plan system.

He said: "Some other councils are having to make significant adjustments to their structure but, because of our robust three-year planning process, we are able to react quickly to changes in circumstances.

"The three-year plan was written under different financial circumstances and this is currently being amended.

"The council will not be turning to already hard-pressed residents to fund the authority out of the current position.

"Instead, we will prudently manage ourselves out of the situation."