SOUTHEND council is in the worst financial crisis in its history.
Leading councillors confirmed the authority faces bankruptcy if £11million is not trimmed from next year's budget or council taxes raised.
The authority is likely to be stopped by the Government if it attempts to raise tax bills above six per cent.
The cash crisis reached a climax on Tuesday when defiant councillors refused to release £3million from reserves to pay debts in its children's services department.
Alastair Robertson, chief officer for children and learning services, presented a report to Cabinet members detailing how budgets had been pushed into the red.
But councillor Brian Kelly, lead member for resources, told the meeting that dipping into reserves half way through a financial year was no way forward.
"I'm very worried," he warned, "We might go bankrupt next year if we don't raise council tax.
"We must go back and see what can be done to reduce this spending."
Councillor John Lamb, Cabinet committee vice chair, backed his Tory colleague and insisted continual overspends on budgets must end.
"We must take action," he added.
"These are the most serious comments I've ever seen in a council report. I cannot support releasing money from our reserves at this stage."
Councillors agreed a proposal put forward by councillor Tony North that a sub-committee be set up to investigate ways to save money.
Council leader Anna Waite said the financial problems were part of a legacy of severe Government under-funding.
The administration claims it has lost millions of pounds in grants since 2000 because of an inaccurate census carried out by the Office of National Statistics. The ONS denies the claims, following an 18-month investigation.
Banner-waving campaigners descended on Downing Street in a Valentine's Day protest earlier this year to stop Southend services being cut to the bone.
Around 100 supporters ranging from MPs and councillors to community and religious leaders protested at the threatened closure of the Palace Theatre and seven community centres.
Council leader Howard Briggs eventually resigned stating it was impossible to run the authority on the cash made available by Government.