CAERPHILLY council leader Lindsay Whittle said he is facing a tough test as the council faces having to make spending cuts of around £5million.

Following the provisional Local Government settlement payment of £6.36m from the Welsh Assembly, which was an increase of 2.67 percent on last year, Cllr Whittle said savings must be made in all areas to help the council through the 2009/10 financial year.

At a meeting of the cabinet meeting, Chief executive Stuart Rosser said taking inflation into consideration, the council needed a five or six percent payment increase "just to stand still."

The average pay increase across Wales was 2.7 percent.

In a report prepared for the cabinet, it was stated that "a significant reprioritisation of schemes for 2009/2010" was needed and a reduction in capital spending of between £4m - £5m.

The report said there will be "personnel implications arising from the budget strategy," by Cllr Whittle said job losses were not being considered at present.

"Losing people will be the absolute last resort, it’s not even on the agenda at the moment," he said.

Meetings with the council's scrutiny committees throughout November and December will discuss the impact this will have across the board.

Cllr Whittle said the relatively small increase, combined with the increase in electricity, gas and fuel in recent years, meant there would be no new initiatives unless an old one was lost, but said he was optimistic the council could cope.

"The next two years are going to be the toughest of my life. We want all councillors and officers to pull together."

He added that four years ago, the council spent around £600,000 on energy bills, and next year they expected to pay in the region of £5m.

Cllr Whittle added: "Every council worker has to treat the budget as if it’s their own personal budget."