£25m rescue package for Hackney

The Government is to bail out debt-ridden Hackney council for a second time in two years after discovering its financial problems are so "huge" that existing rescue measures will not work.

Stephen Byers, the minister responsible for local government, has agreed a £25 million handout as the only way to stop the Labourrun borough's public services becoming "totally unsatisfactory".

The move, which follows a £20 million package last year, comes six months after Mr Byers exercised new powers for the first time to direct the council on how to run its basic services. At the time there were fears that its estimated £50 million deficit was about to lead to financial collapse.

Since then the Government has set a series of targets for improvementbut after looking at the council's books it has reluctantly conceded that more cash is needed first. An announcement of the £25 million for the forthcoming financial year is expected soon.

One senior Government source said: "Last July we had a report from the Audit Commission which said that the council was a disaster - services were very poor.

"If we were to require Hackney to bring their finances back into a a state of balance within one year, the only way that could be achieved would be through cuts that would be unacceptable to local people. This is to protect services in the coming year."