Edinburgh City Council is to encourage 2000 workers to take voluntary redundancy in a bid to address a £126m budget shortfall over the next four years.

The council has a policy of not making compulsory redundancies, but may have to go back on this, officials said as part of a host of cost-cutting measures which are set to be presented to the council's finance and resources committee.

The fact that 60% of the council's budget goes on salaries means it has few options to achieve the necessary savings, they said.

Other measures being proposed include a review of the Council’s commercial and procurement strategy, which could see the council outsourcing services such as facilities management and a new asset management strategy to maximise the value of the council's extensive property estate.

The council said this could potentially save £80m over 10 years by making the council's investments more efficient.

Although the council's budget shortfall had previously been stated as £107m, the council confirmed it has additional savings to make as a result of overspending by £10m on health and social care and by £9.5m on its property budget.

Councillor Alasdair Rankin, finance convener, said: “The council is experiencing greater demand for services than ever before, with a growing population in Edinburgh and increasing numbers of older people and younger people, while our overall budget remains the same.

"We need to take action in order to achieve the necessary savings to meet this demand, and we are making every effort to do this in a way that will safeguard frontline services for the people of Edinburgh."

"We recognise that some of these proposals may involve tough decisions, including a reduction in Council jobs, particularly in middle management. But while this won’t to be easy, savings will allow us to prioritise the things that matter most to people. Our aim, as ever, is to improve and enhance the city for residents. ”

Unison Edinburgh branch president John Stevenson said the union still feared nearer 3000 job losses would be needed. He added: "There needs to be a clear political direction in the council. If the council is opposed to compulsory redundancy and privatisation, officials need to understand that and councillors need to act on it. If that is not the case, the council needs to come clean with us.

"Meanwhile the Scottish Government has to do something while the future of local government finance is being debated, to address the immediate problems of councils which face going to the wall in the interrim, unable to fulfil even basic statutory functions very well."

All of the proposals will be considered by Councillors at the Finance and Resources Committee of the Council on 24 September.