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Liverpool City Council must shut down part of its in-house contract workforce after overspending its targets by nearly pounds 5m, the Government said yesterday. The Labour authority with the highest council tax was warned that other in-house services also risk closure if they fail to meet targets.

The council's direct labour organisations overspent by nearly pounds 5m in 1994/95, including about pounds 3m on highways and sewer work. Other areas were buildings, cleaning, schools, welfare, catering, grounds maintenance and vehicle maintenance. Sir Paul Beresford, the Environment minister, yesterday ruled that the council must cease 60 per cent of its grounds maintenance work by next February. The council, which is considering a legal challenge, says between 250 and 300 jobs are affected, although incoming private contractors would be obliged to offer jobs to the existing staff.