London Corporation facing financial crisis

Britain's oldest local authority, the Corporation of London, is facing one of the deepest financial crises of its 1000-year history.

The Corporation - responsible for the City, the Thames in London and large swathes of the green belt - has warned that it is rapidly running out of money.

Council members have been told to "steel themselves for some very difficult decisions" or face a potentially disastrous cash crunch.

The shortfall has already sparked an explosive row over the future of the swimming ponds on Hampstead Heath, which it also runs.

Now the Corporation is being forced to consider other drastic cost-saving measures, such as closing all six of the manned public lavatories in the Square Mile to save ?1.3 million a year.

The Corporation provides services for just 8,000 permanent residents- - but also for the army of workers who pour into the City every weekday.

Officials believe the 325,000 people who work in the City could cope without the lavatories. "You have to wonder if they are still needed. People are quite used to popping into a coffee bar when they need to go these days," said one Corporation source.

The City authority's revenues have come under severe pressure in recent years through a combination-of falling investment income and the ending of a special rebate deal with the Government worth ?6.5 million a year.

It also claims it is penalised by the complex formula for calculating central government grants because it has so few permanent residents.

The Corporation's finance chief, Ian Luder, last week warned the City's ruling Court of Common Council that it faced a ?9.3 million revenue funding gap in the next

financial year. The shortfall will widen to ?12.2 million in 2006-07, forcing the authority to dip ever deeper into its reserves. The current rate of losses means that the Corporation will effectively be out of money within six years.

In a sombre presentation Mr Luder warned that the Corporation, which presides over the greatest concentration of wealth in Europe, faces " difficult decisions" to get its finances back on an even keel.

He said: "This could include the possibility of removing certain services altogether rather than continually cutting them back. We will have to consider also whether we remain able to provide the whole range of services for the benefit of our stakeholders and wider London."

Today he told the Evening Standard: "The revenue deficit is at a level we cannot sustain indefinitely. We have two choices: either we can just cut all budgets by five per cent across the board, or we can take a slightly longer view and ask ourselves whether we are doing some things that we do not need to do."

Mr Luder said options for axing services would be presented to the Council in May.

The Corporation is also responsible for the five City bridges, the Barbican and large areas of ancient woodland including Epping Forest in Essex and Burnham Beeches near Slough, and health issues relating to Thames cargo between Teddington Lock and the sea. It also runs the Animal Reception Centre at Heathrow.