It will involve tough decisions to tackle years of failure and it will be painful but the Government is clear it must happen

Stephen Byers

If the changes cannot be delivered, Whitehall will take over direct control of the departments.

But Geoff Martin, London convenor for Unison - which represents more than half the Council's 5,000 employees - claims the government approach is "contradictory".

He said: "On the one hand they are saying improve services and on the other cut spending.

"You can't do both. It will just increase the chaos in Hackney.

"The long-term implication of what the Government is telling the council to do is going to be large-scale job losses and a deterioration of services in one of the poorest parts of the country."

Stephen Byers: "..years of failure.."

The government action was prompted by a highly critical Audit Commission report.

The Commission Controller Sir Andrew Foster said: "Urgent action is needed to improve the services the council delivers to its citizens and to bring its finances under control."

Announcing the measures, Mr Byers said: "The government is simply not prepared to let the present situation continue.

"It is unacceptable that people who live or work in Hackney should have to suffer poor services because of the council's corporate failure.

"It will involve tough decisions to tackle the years of failure and it will be painful but the Government is clear it must happen."

Hackney Council's debts are expected to reach �20m by the end of the current financial year.

The authority has been given until 2 October to respond to the package announced by the government.