John Sowden told the Advertiser the council could not rule out job losses from next year and was readying itself to act quickly if the Government slashed grants to local authorities as anticipated.

Whitehall's comprehensive spending review was expected in July 2009, but probably won't be published until December this year.

In the meantime, Harrogate Council will produce a strategy for dealing with "radically different financial outcomes" - Government grants currently fund about 10 per cent of its spending.

Mr Sowden said: "We have no plans to cut jobs over the coming months, but we are looking at options of how we would save money if needs be and that would focus on efficiency savings rather than cuts in front-line services.

"It may or may not impact on staffing levels."

Drastic

Addressing Harrogate Council on Wednesday, Mr Sowden said the council was operating in a climate of "quite severe economic uncertainty" and would draw up a strategy for dealing with reduced income in the summer.

"We are not recommending any radical steps to reduce staffing until we know what the actual scenario is," he said.

Coun Cliff Trotter questioned the policy, saying to Mr Sowden: "Usually we say we are not going to take any drastic action, but other councils are reducing staff levels now - do they know more than us?

"Are you just being more cautious? Should you let people know what is going on in advance so they can prepare, instead of just saying to them in three months' time: 'People, you are going to be made redundant.'?"

Mr Sowden said other councils may be making cuts already because their prospects for the next two years were less rosy.

Meanwhile, North Yorkshire County Council is predicting 300 to 500 fewer positions over the next three years, with job losses minimised through non replacements, temporary positions, and retraining.The County Council employs 24,000 full and part time staff.

Demand

A reduction in Government funding is expected to leave a gap of £25m in the council's finances during the 2011-12 and 2012-13 financial years. A growing demand for services is predicted to compound the shortfall by a further £15m during these two financial years.

Chief Executive John Marsden stressed the authority was already making efficiency savings of £11million to balance the books in the coming financial year, using technology as the key for savings, both now and in the future.

The county council has an annual budget of £900m but faces pressure through increasing demand for services, particularly care of the elderly in North Yorkshire.

There will be 50 per cent more people aged over the age of 65 living in the county by 2020 – a quarter of the total population. In 2001, the over-65s represented only 18 per cent.