There were claims today that Bradford Council stands to pay out £500,000 a week in penalties if computer workers take strike action later this month.

Staff have threatened to "cripple" the £160 million Bradford-i project in which a private partner runs the authority's computer network.

Public services union Unison believes the deal with Serco Solutions, formerly IBM/IT Net, will see a third of the staff being axed, though the Council has described the issue as a "misunderstanding".

The contract, which should have been signed last week, has now been put on ice while emergency talks between the two sides continue.

Union leaders claim that if it is signed, and staff strike, the Council could be financially liable since the company needs the Council's IT staff to carry out the work it is being contracted to do.

A Unison spokesman said a ballot on industrial action began yesterday and he expects a positive result on June 10, adding: "As a consequence of that, IBM would not be able to fulfil their contract and would deem the Council as frustrating the contract - therefore there would be penalties."

He added: "We believe that figure could be as high as £500,000 a week."

However a Bradford Council spokesman was adamant that the authority is not liable as long as the contract remains unsigned, adding: "The contract has not been signed and therefore all figures are purely speculative."

A strike could affect many aspects of the Council's work, including bill payments and the planning process, and if computer systems break down they may not be repaired.

The project has come close to provoking strike action before but, after weeks of negotiations between the two sides earlier this year, it finally went before members for approval at last month's meeting of the full Council, winning cross-party support.

Meanwhile the Council has denied the Bradford-i dispute could have any impact on the similarly controversial Asset Management Project (AMP).

The AMP deal, which is also reaching its final stages, would see Council-owned buildings handed over to a private partner who would be responsible for managing and upgrading them.

Council staff affected by this deal have been watching the Bradford-I saga carefully to see how the terms and conditions of IT staff change under their deal.

The spokesman said: "The Asset Management Project is an entirely separate project and further meetings are ongoing."