Essex County Council jobs and services will have to be savagely slashed next year to meet a £126million budget deficit caused by cuts in Government grants.

The shortfall is about £18million greater than expected, Tory county council leader Peter Martin told colleages at County Hall yesterday.

It means Essex will get more than ten per cent less from Whitehall next year than it had expected.

When the results of the Government’s comprehensive spending review were announced in October, the council had expected to lose about £108million in grants.

The reality has turned out to be far grimmer, partly because the Government is diverting £15.7million to other counties deemed to be more deserving.

So far the council has found ways to save just £90million next year, leaving it with another £36million still to find.

Leader Peter Martin said: “We appear to have £18million less grant than we had budgeted for. However, because we are in a strong financial position, we have got sufficient reserves.”

Even so, he admitted the council was “going to have to make a lot of people redundant”.

David Finch, Tory councillor responsible for finance, added: “It is not as bad as it could have been. We will have to take a considered position. We may well use reserves and other austerity measures.”

These could include selling assets, cutting more jobs and further reducing services.

The council must decide exactly how to balance the books in time to set a budget at a cabinet meeting on January 25.

The council has more than £205million salted away in its reserves, but most of that cannot be easily used.

Almost £50million is held by its schools, a further £63million relates to private finance initiatives and £60million has been set aside to pay a big landfill fines and tax bill expected in 2013.

This leaves the council with general reserves of about £33million, though it is unlikely it would want to blow all of this and have nothing left for emergencies.

Over the past four years, the council has already shaved £190million from its budgets.