A SCOTS council's direct labour department recorded a #3m deficit last year before digging a similar #3m black hole this year, it was claimed last night.
The allegations were made by a senior council official at beleaguered East Ayrshire Council as local government Minister Calum MacDonald read the riot act to councils in Scotland.
He told them he wanted no more ''nasty surprises'' like the case of the #54,000-a-year plumber in North Lanarkshire.
As the SNP called on East Ayrshire's Labour council leader David Sneller to resign, the council said the allegations of a further #3m deficit were ''mischief making''.
A spokesman said that, when the accounts for 1996/97 closed, they may have been showing a #3m deficit. ''However, when invoices were paid and income taken into account, the real deficit was #177,000.''
A senior council official, not connected with the commercial operations department, said: ''The department's main problem was that its clients - who were other council departments - wouldn't pay it because they had overspent their own budgets on other things.
''It has become an almost Alice in Wonderland situation and will end with the nightmare scenario of the direct labour workers being axed and their senior management left to carry the can for the failings of other departments.
''All sorts of things were being lumped on to the commercial operations department deficit because it was thought it didn't matter as it was going down the plug anyway.
''But now the move by Donald Dewar to send in external auditors has caused panic at what might be revealed, especially as I have been told that some kind of sleight of hand was used last year to turn another #3m loss.''
A councillor, who did not wish to be named for fear of physical reprisals from colleagues, said: ''What has been happening in East Ayrshire is nothing short of a farce. It would be funny if it wasn't for the level of public money squandered. The main problem in the commercial operations department has nothing to do with its internal management.
''It is all about a decision taken to axe the department and then find the means of achieving that end without having to take the politically suicidal decision of publicly voting to throw hundreds of employees on to the scrapheap.
''The director and his deputy have been used as scapegoats to achieve political ends and, now that Donald Dewar has ordered an external inquiry, the Star Chamber antics, which are regarded as normal in East Ayrshire, will be exposed as long as New Labour has got the bottle to do it.''
Last night, Frank Minnery, joint trade union spokesman, said: ''We will not be used as political sheep being led as sacrificial lambs to the altar of the private sector by people in pursuit of political aspirations.''
It also emerged that the director of East Ayrshire Council's commercial operations department and his three deputy directors called for an independent investigation into their own department early last December. Their move was prompted by fears their department was being ''scapegoated'' by some Labour councillors who wanted to close it.
Originally, East Ayrshire Council indicated in a press release it only knew of the financial problem in February 1998, but after Mr Dewar announced his external inquiry into the council this week, it was then reported that the council was aware of a problem in November.
However, senior council officials have admitted privately that the problem was common knowledge from last autumn.
The minutes of a meeting of the commercial operations committee on October 16, 1997 show that, between April and September 12 of that year, spending was already #893,385 over budget - only five months into the financial year.
Two of the signatories to the ''independent inquiry call'' letter were suspended in February this year, including department director Des Tierney, while an internal council inquiry was launched. However, no action was taken on the demand for an independent inquiry.
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