It's pooled budgets with a difference in one part of east London, as the NHS helps social services withstand swingeing cuts in service provision. Tash Shifrin reports

If armies went dancing furiously into battle to the thundering sounds of samba drum band. . . it would sound a bit like Hackney on a rainy Monday night.

Hundreds of demonstrators are dancing in the street, angry but exuberant. They block the main road through the east London borough, chanting, 'No more cuts! No more cuts!'

Facing them is a heavily kitted out line of riot police. Rain streaks down their visors and shields.

More police surround the town hall, protecting the councillors as they vote through a£22.5m package of cuts.

The cuts vote ended a three week total spending freeze. But within a fortnight a projected 'budget gap' of£76.4m in 2001-02 emerged. 'Meltdown' is the word most often used about Hackney council's finances. This is not how local government is described in cheery health service circulars on joint working.

The authority was also comprehensively panned this month in a joint inspection by the Audit Commission, District Audit, schools watchdog Ofsted and the Social Services Inspectorate.

Council officers staring down the black hole to see how deep it is may soon be joined by NHS managers.

Already, the NHS has had to chip in to ensure services for patients are maintained. London regional office and East London and the City health authority provided£250,000 during the spending freeze, aimed particularly at maintaining hospital discharges while social services could not fund care plans.

Social services director Mary Richardson is grateful. 'As a result of the money that health gave, there has been no deterioration in terms of blocked beds, ' she says.

'The health money dealt with the short-term problem of not being able to make these placements and provides a cushion while we remodel our services.'

She talks about 'managing down' spending in some areas 'so we are less dependent on higher tariff packages'.

The council cuts agreed so far include£696,000 from residential care. In a report to councillors, Hackney council managing director Max Caller warned: 'This would prevent us continuing to place people from the community or hospital into residential care or nursing care.'

But Homerton Hospital trust finance director Roger Sirman - who, like many asked about working with the council, responds to questions with a short laugh - is 'hopeful that there will not be an adverse effect this winter'.

Ms Richardson says the council is 'currently buying too much residential capacity' and would prefer to invest more in rehabilitative care.

The NHS cash gives her time for this sort of 'realignment', she says.

But City and Hackney primary care group chair Dr Gaby Tobias says she fears 'a higher threshold for placements and care plans' in future. A Hackney council spokesperson admits that there will 'definitely be an effect' on new care plans, although 'it will take time to work out new guidelines'.

In the face of it all, an unlikely solidarity persists across the health and local government divide.

Laura Sharpe, chief executive at City and Hackney PCG and acting chief executive of City and Hackney Community trust, does not want to get involved in 'slagging off the council'.

'The reality on the ground is that work continues, ' she says.

This is a credit to health and social services staff 'in the middle of a disruptive situation'.

'Ironically, ' she says, 'this has made our strategic intent more firm. The days of washing your hands and saying it's not a health problem - that's not tenable.'

A health and social care 'partnership board' is all set to have its first meeting in January, 'which is sort of surprising', she says.

And although they are not at the 'joint commissioning budget stage', Ms Sharpe 'would still like to get there'. 'I'm not wanting to paint a rosy picture that everything is fine, ' she says, admitting that it is not yet clear 'how bad' the impact on services will be.

But she says: 'For me, there's an upfront, honest relation between us. A problem is a problem - we don't pretend otherwise - but then we say, how are we going to solve it?'

Peter Horn, chief executive of East London and the City Mental Health trust, is looking at 'areas where we can work constructively together' with the council. He stresses: 'At a senior level we've got good relations.'

But services are 'under a great deal of pressure', he says. 'We are trying to support frontline staff and protect them from some of the politics.' The trust has 'expressed concerns' to the council about child and adolescent services, 'where they have made some significant reductions'.

In less obvious areas the council's crisis also hits health. Dr Tobias says people are coming into GP surgeries 'in all sorts of distress' because they have not received their housing benefit. Around 17,000 claims are yet to be assessed by private contractor ITnet.

Some people are in rent arrears, some threatened with eviction.

'Elderly people are completely freaked out, 'Dr Tobias says. 'Nothing like it has happened to them before.'

She says: 'It is tragic for a borough as deprived as Hackney to be in this mess, on top of what is gross underfunding anyway.'

An advertisement placed by Hackney Unison contrasts the situation with the 'millions to bail out the Dome'. Partnership with a grounded flying saucer of no known use might be cheaper for the health service, too.