Ministers warned of Hackney 'meltdown'

In its most damning report ever, the Audit Commission has warned ministers they must mount a rescue plan to save Britain's poorest council, Hackney in London, from a complete "meltdown" in services.

In its most damning report ever, the Audit Commission has warned ministers they must mount a rescue plan to save Britain's poorest council, Hackney in London, from a complete "meltdown" in services.

For the first time in its history, the Commission said it would ask ministers to intervene as residents and council workers demonstrated outside the borough's town hall last night while the council considered plans for deep budget cuts and up to 500 redundancies.

The council has been forced to lay off half its 280 refuse collection staff after a freeze was ordered on all new spending. As piles of uncollected rubbish mounted across the borough, residents reported seeing rats on the streets.

Yesterday, refuse collectors brought much of the borough's roads to a standstill after driving more than 50 refuse trucks and street sweeping vehicles through central Hackney in a slow protest convoy similar to the tactics used by fuel protesters.

Parents have also protested at plans to close down severalnurseries by occupying two nurseries for the third week. The Audit Commission also revealed the council has only collected 50 per cent of council tax payments and has 17,000 housing benefit claims outstanding.

Diane Abbott, the Labour MP for Hackney North and Stoke Newington, said the borough was facing "meltdown" and called on the Government to give it an immediate emergency grant to help save essential services from closure. She said: "This has been happening year after year but Hackney can't sustain any more cuts. You can't have key services in a state of collapse in Britain's poorest borough. You can't have rats on the streets of central London."

In a highly critical report released last night, the Audit Commission said the council has "very serious financial and service delivery problems". It added: "The council does not have the capacity to solve these without additional help."

It said Hackney "was unable to meet this year's financial commitments", and accused the council of lacking "clear political leadership" and of failing to have in place "a full team of strong top managers to lead it out of trouble".

The report will intensify pressure on ministers and the Department of the Environment, Transport and the Regions to consider further emergency grants. However, the commission gave the council's new managing director, Max Caller, its support. It made the council subject to probation reports every three months until July. If the council failed to improve, it could then agree to further central government grants for the borough.

Last night, the borough's ruling Labour-Conservative coalition voted on a rescue package drawn up by council officers to avoid the council becoming bankrupt. Early estimates were that the council faced a £40m deficit in its £250m budget. "The true financial position is now much clearer and tough decisions are required to avoid a budget deficit this year of £15m," said the joint council leaders, Jules Pipe and Eric Ollerenshaw.