Bosses at one of Scotland's smallest councils have rejected reports that they could be forced to shed up to 500 jobs after losing millions of pounds on the stock market.

Shetland Islands Council has admitted to making "substantial losses" on its reserve funds and blames its financial woes on the market crash following the 11 September attacks.

Savings of up to �15m a year now need to be made by the authority, but its convener has denied that could mean axing 500 of the 2,100 staff.

Councillor Tom Stove denied any figure had been put on the number of redundancies needed and he said he hoped they could be secured through natural wastage.

Tom Stove denied there would be 500 jobs lost

Councillor Stove said the figure of 500 was "invented by the media" and added that staff were aware of the difficulties being faced by the council.

He said: "I think they are all well aware of the fact that we haven't decided on any number at all.

"We are trying to slim down the organisation. We have given the chief officials the message that it should not affect delivery of service at the front line."

He added: "We're hopeful that there will be no compulsory redundancies at all, at the moment we are looking for people who want to take early retirement or take a package from us and the staff are all well aware of that."

Union involved

Morgan Goodlad, council chief executive, said the cuts are expected to be made over the next four years.

"The figures have been calculated and our target is now to save �15m," Mr Goodlad said.

"This is not a knee-jerk move, we have been looking at our financial situation for some time and these job losses are not expected all in the near future."

The council has been hit by the shares slump

He said the losses had accumulated and the council was now strapped for cash to supply its proposed services.

He added: "We have lost millions in recent months and therefore have no funding for our capital programme.

"I have called for voluntary redundancies and retirements and we will wait to see what develops with this before saying exactly how many jobs will go, obviously I hope it will be nowhere near 500."

A Unison union spokesman said it was concerned about the job losses but is involved in negotiations.

"Obviously this is a major concern for Unison and our members, and we will be working along with the council to try and ensure that we get the right result," he said.