WYRE Forest will be hit by a double cash whammy next year, the district council's financial chief has warned.

Interest rates look set to continue falling, slashing the council's annual income by half a million pounds, while government funding is failing to keep pace with need.

The warning, by head of financial services Keith Bannister, came at a meeting of the environment and development overview and scrutiny committee which received a report about next year's budget.

Chairman councillor Fran Oborski warned of the ongoing disastrous consequences of the terrorist attack in New York of September 11 on financial confidence.

Mr Bannister said the base interest rate had been cut to four per cent with a further quarter of a per cent cut expected in January and a further quarter in April, taking the rate to just three-and-a-half per cent.

He added: "That means our income will be half a million pounds down compared with 2000-2001. This half a million pounds will have to be found by one means or another to balance the budget."

In addition, he said the council was faced with a year-on-year financial stalemate.

He described this year's Government Standard Spending Assessment (SSA) of four per cent as disappointing and said while it allowed for inflation it was not enough to fund any growth in services or new initiatives.

He said a greater share of cash was going to the county authority, to education and social services, and said the district council was very much the "poor relation".

Mr Bannister added while the Government was going to change the funding mechanism from 2004 it was not expected to change things to any great extent.

He said the council also had to take into account that if it set a Council Tax significantly above the recommended level it would be capped. Members noted the report.