A pay freeze and a cut in working hours was today facing thousands of Walsall Council staff due to a new cash crisis.

Workers could be forced to take a financial hit to offset a predicted £5.6 million overspend for this year, a figure which has soared by £200,000 since June.

Council chiefs are holding urgent talks to try to avoid further cutbacks as the financial black hole deepens.

Mike Bird, council leader, today insisted all options were being considered, including placing staff on reduced hours in an attempt to avoid an impact on front line services. More than 12,000 people are on the payroll at Walsall Council.

Councillor Bird said today: “We are looking at ways of increasing income instead of cuts. We don’t want to take out services so may look at prices.

“We have got to react to what is happening and what the private sector is having to do. We may talk to staff about having a pay freeze and it is far better to have a job on reduced hours than not at all.”

The predicted overspend comes as the authority was already looking to slash £13.4m from its 2009/10 spend. It has already axed 50 jobs, cut library hours and scrapped the annual Walsall Illuminations to save money.

Councillor Chris Towe, who has responsibility for finance, said today Walsall was in a similar position to authorities nationwide.

He said: “Reduced levels of income are being experienced across all areas as fewer people use our leisure centres, car parks and search inquiries due to external factors which the council cannot control. As the business, building and property sectors shrink, there is also reduced income from planning, estate-managed property and building design fees.”

By Craig Hughes