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As many as 600 jobs could go at Caerphilly County Borough Council, its leader has warned, as the local authority battles to save a “huge sum” of money.

The council anticipates it will have to save £45 million over the next two years – including £33m this year – to balance its budgets.

The cabinet member for finance, meanwhile, challenged claims the council was sitting on £200m of reserves and said the amount available for emergency spending was actually £16m.

The two senior councillors were speaking at a meeting with colleagues, on Monday October 1, to give more clarity on the financial pressures Caerphilly Council is facing.

The council says the £45m budget gap has opened because the cost of providing and running services has increased at a faster rate than Welsh Government grants, which make up the bulk of the council’s funding.

Council leader Sean Morgan, who previously likened the situation to “austerity on steroids”, told colleagues the budget outlook made for “sombre viewing”.

The council has so far found ways it can save £28m over the next two years, through a combination of streamlining services, tightening up its spending, and making cuts.

That was evident recently, when council leaders backed a proposal to mothball the museum at Llancaiach Fawr, which it currently subsidises by £485,000 each year.

That decision proved controversial – Cllr Morgan admitted as much on Monday when he referred to the “passionate and sometimes angry” scenes in the council chamber as the mothballing plan was debated.

A proposal to cut the council’s subsidised meals on wheels scheme, Meals Direct, was abandoned on decision day, owing to the strength of feeling around saving the “lifeline” service.

In his appeal to councillors on Monday, Cllr Morgan asked colleagues to “shape the future” of the council by protecting key services in the face of an “unprecedented” financial situation.

Ominously, he warned that work would lead to more difficult decisions, including on the future of many council workers.

“The council will be facing a reduction of around 600 full-time equivalent roles – that’s around 10% of our current workforce,” he announced.

The council will “minimise” enforced redundancies but will “work with staff to look at redeployment and early retirement, to mitigate against the impacts of a shrinking workforce”.

Cllr Morgan added: “While nobody would wish to be in this invidious position, it’s a position that has been imposed on us.”

Eluned Stenner, the cabinet member for finance, told colleagues claims made about the council’s healthy reserves balance should not be misread.

“Reserves can only be used once and cannot be relied upon to set balanced budgets in the medium to long-term,” she explained.

While the council held £192m in reserve at the end of March, the vast majority could not be diverted into paying to run services, Cllr Stenner said.

Some £37.4m is ring-fenced for housing, schools and insurance; while £28.9m is capital reserves which must be used on building instead of running services, and another £36.3m had already been set aside to build new schools.

A further £73.3m has already been earmarked for specific projects already approved by the council, leaving an “uncommitted” balance of just £16.4m.

“To put this into context, this would only fund revenue expenditure for a period of two weeks,” Cllr Stenner said, adding: “It is our duty not to intentionally lead the public into believing that this authority has £192m at its fingertips to ensure that there will be no cuts to public services – this just isn’t the case.”

Cllr Morgan also told colleagues he had offered to meet with trade unions to discuss any anticipated impacts on the council’s workforce.