The effects of the global financial crisis hit Edinburgh last week, as it was confirmed that the council faces growing financial pressures.

Until recently it was expected that Edinburgh City Council would bring in around £43 million from the sale of land and properties which would pay for new projects in the capital. However it is now faced with a shortfall of up to £20 million.

Similarly, increases in the price of fuel and energy could cost the council around an extra £10 million next year. The autumn budget statement has warned that the combined cost of inflation and the downturn in the economy, along with the increase in demand for care services and affordable housing, means the council will find itself in an increasingly difficult financial position.

The ongoing decline of the stock exchange and the slashing of interest rates indicate that the effects of the credit crunch are becoming increasingly real for the general population. The downturn which may have previously affected only the financial system is now set to affect the lives of millions of people in the UK.

In September, councillors on the finance committee agreed that there should be a high-level strategy for council funding, including a ten-year programme for capital investment.

However, finance convenor Councillor Gordon Mackenzie conceded: “Our intention is to plan for the long-term but we must also focus on the problems of today, especially with the current uncertainty over economic conditions.

“Of course, we will continue the drive for efficiency savings, but we will also have to look again at what are the really important services we provide. So, we do want to hear from people throughout Edinburgh about where we should concentrate our efforts and resources.”

Questionnaires for the business community, voluntary sector and general public are to be made available online, and neighbourhood partnerships will also be getting involved in the discussions about priorities for the next year. The budget-setting process is carried on throughout the year, but the consultation feedback and other detailed information will be considered from December, with the council due to meet in February to agree its financial plan for 2009-2010.

Councillor Mackenzie added: “This city, like every other community, will feel the effects of the credit crunch and rising prices. It will impact our plans, but what we have to do is ensure that we continue to deliver as much for the people of Edinburgh as we can, and to keep ourselves well placed for when the recovery comes. Every budget process is difficult and this one is likely to involve particularly tough choices.”

Residents, businesses and charities are to be consulted on the council’s plans to talk about the crisis and possible countermoves to fight against the increase of costs and the lower income.