BURNLEY Council's chronic instability could lead to a major crisis in setting next year's budget and council tax, leading councillors warned today.

Negotiations to try to set a budget and council tax rate acceptable to the council will start once a new executive is in place next week.

But the Liberal Democrats have already warned they will not stand for any rise in the council tax rate, despite the fact the council must find £1million in savings for next year.

The council narrowly avoided Government intervention when they re-elected Stuart Caddy as council leader on Wednesday.

But the political make-up of the chamber - 24 opposition members and 21 Labour - means big decisions like the budget, due to be set at the start of March, will remain difficult.

Budget discussions will be held by the finance and performance committee, which is made up of the same members as the executive, and will be shadowed by the finance and performance scrutiny panel.

Liberal Democrat leader Gordon Birtwistle warned Labour they would have to give serious political ground over budget decisions.

He said: "In previous years the Labour party have been able to put their budget and the other parties have had to accept it, but this time round we will be making a serious impact.

"We will be putting forward our proposals and Labour will not like it. They will have to make some substantial compromises.

"We will not agree to any increase in the council tax and the £1million savings will have to be met from efficiencies, not cuts to public services.

"It will not be an easy process."

Coun Peter Doyle, Conservative leader, said: "The budget could be difficult this year. Labour need to be sensible and work with other groups or there could be problems. Hopefully, we will be able to negotiate an agreed budget before the meeting."

Coun Peter Kenyon, Labour's finance supremo, said: "Setting the budget is a matter for decision by the council.

Though, theoretically, it may fail to carry a budget resolution, a series of meetings of the finance and performance group and finance and performance scrutiny panel, which contains all the leaders of opposition parties, means everyone will be aware of the budget context.

The council will meet on Monday night to decide the make-up of a new executive, which will be formed by a coalition of different parties or solely Labour members.