Hyndburn's economy is facing its toughest challenge for two decades, the council leader has admitted.
Finance chiefs have been tasked with chopping over 16 per cent from estimated budgets, by finding savings of £2.6 million.
But they have promised not to increase council taxes for the second successive year following the government's offer of a £135,000 incentive for a council tax freeze.
Council leader Peter Britcliffe told Tuesday's Cabinet meeting it was "the most difficult budget procedure we have had to go through in the last 20 years."
But he claimed frontline services would not be damaged and job losses would be minimal. The council will also continue to fund Police Community Support Officers and the Floral Market Town Initiative.
Proposed budget savings include additional fee income from regeneration services of £418,689, and miscellaneous 'staff savings' of over £1 million. Half of this is down to the deletion of vacant posts.
A further £196,598 will be saved by a restructuring of the planning service, £80,000 in 'negotiated savings' from Leisure in Hyndburn, £22,000 from the operation of Oswaldtwistle Civic Theatre, and even £5,285 cut from the Christmas festivities budget.
Councillors will also be asked to bear some of the pain with £30,000 found from members' allowances, on top of a £1,758 reduction in the deputy mayor's allowance.
However, another £240,000 in required savings are yet to be identified.
The council built up an £880,000 war chest from last year's underspend, but officers have been instructed to ensure that any draw from the authority's reserves is minimised or eliminated.
Coun Britcliffe said: "The message has to get out that there is no crisis here. The Hyndburn ship is steady. The recession does continue to bite, families are struggling, and we have got to help residents in Hyndburn by keeping council tax as low as possible."
Hyndburn has received a grant settlement of £7.9 million from central government, with a further reduction of £975,000 for 2012/13 and an expectation of an additional £640,000 cut in 2013/14.
The borough has also been awarded a £2.7 million transitional grant for 2011/12 to smooth the transition between old levels of funding and the new level. This will be used to offset the loss of capital grant through pots such as the Local Enterprise Growth Initiative and Housing Market Renewal.
Coun Britcliffe said the overall reduction in the council's spend would 'only' be 7 per cent - although this figure includes the £5.4 million collected in council tax.
Overall, the total spending available is £13.4 million.
The budget brought before Cabinet is a working document and will be submitted to full council on March 1. The opposition groups have been set a deadline of Friday, February 11 to put forward budget suggestions for consideration by the council.
The meeting was at Scaitcliffe House, Accrington and reporter Stuart Pike reported live with news of cuts and reaction. Click on the grey box below to read his updates, or click here to read on a mobile device.