Rising energy and fuel prices are stoking a financial meltdown in local authorities across the UK, threatening thousands of jobs as well as services, including highways maintenance.

Faced with a £17M budget gap, Oldham Metropolitan Borough Council announced this week it was looking to cut up to 850 jobs from a workforce of 5,000.

Council leader, Howard Sykes, said: ‘The fact is that the council has to find £17.3M of savings to balance next year’s budget.

‘Staffing costs, like those of a lot of other councils throughout the country, are a big part of our overall budget, so it is inevitable that we should explore the potential savings in this area.’ A council spokesman said there would be a ‘root and branch’ evaluation of all services, and all avenues would be investigated to save on energy.

Wolverhampton City Council is also planning to cut 300 ‘back-office’ posts by March 2009, in a bid to cut £60M over the next 10 years. The council is blaming rising energy and fuel prices, high inflation, and a 5% limit on council tax increases for its financial difficulties. A spokesman said it would not know until later in the year about cutting services, but did not rule out reducing highways funding.

In Scotland, Highland Council has a potential £19.6M hole in its 2009/10 budget of which £14M it claims is due to ‘spiralling energy costs’. Other factors include the landfill tax increase.

The council’s leader, Dr Michael Foxley, said: ‘The current economic outlook is bleaker than the height of the Thatcher era in the mid-1990s.

‘This is the worst budget outlook that we’ve faced. It’s hard to see how see how such a substantial problem won’t involve redundancies.’

He said it was inevitable that some services would be hit, especially highways maintenance.

‘We’ve recently put increased funding into road maintenance, but it definitely won’t be increased now, and we’re not getting any more EU money. There will only be funding available for small capital schemes.’

Cash-strapped Inverclyde Council has started seeking voluntary redundancies to close a £10M funding gap, and Aberdeen City Council has launched its formal consultation with trade unions to reduce its workforce. It has to find £50M in ‘efficiency savings’ to balance its books and is looking to voluntary severance and early retirement to cut costs.

Scottish Borders Council is offering similar terms to its staff to shed more than 50 posts this year.

Brian Smith, president of the County Surveyors’ Society and deputy chief executive of Cambridgeshire County Council, said all councils were being squeezed by inflation. ‘The credit crunch will especially hit councils depending on asset sales, such as flow

of Section 106 receipts – as is the case in Cambridgeshire,’ he said.