Croydon's library services have been plunged into limbo after the council failed to agree terms with its preferred outsourcing partner.

The contract to run the borough's 13 public libraries has gone back out to tender just a month before private firm John Laing was due to take control, with campaigners branding the development "a shambles".

The contractor was picked to run the libraries in November ahead of two rival bidders and was supposed to take the reins from April 1.

But all shortlisted bidders can now resubmit their offers after John Laing and the council failed to agree on the level of pensions contributions the company could be liable to pay.

The firm proposed a cap on its pension payments at the eleventh hour, which means all other bidders can now also change their offers.

John Laing and Greenwich Leisure Limited (GLL) are understood to be readying new bids and are allowed to change any part of their original offers.

The third shortlisted bidder, an in-house team of Wandsworth library employees, no longer exists after Wandsworth outsourced its services to GLL last year.

Councillor Tim Pollard, Croydon Council's cabinet member for children, families and learning, said: "It is frustrating that a change which would have delivered significant savings, whilst simultaneously developing the library service, is now going to occur a little later.

"But the most important thing is that we get the process right and it is worth a little inconvenience to make that happen."

The council's Labour opposition group vowed to call an emergency meeting to discuss the contract stalling, which it claimed would leave a "black hole" in the council's budget.

Opposition councillors stormed out of a council meeting last week after being refused permission  to quiz Mr Pollard about the libraries announcement.

Mayor Eddy Aram had banished councillor Timothy Godfrey, shadow cabinet member for culture, from the chamber after he denounced a "cover-up" over the decision to move the announcement to the end of a the meeting - meaning there was no time to pose follow-up questions.

Speaking after the meeting, Mr Godfrey said: "The council is supposed to be saving over £1m through the contract going to John Laing and therefore they have blown a hole in their budget.

"That is pretty serious from the taxpayer’s point of view and that is something we should be allowed to talk about."

He added: “They knew over a week ago that the contract had collapsed, so there is collusion between the political management, the mayor and officers in that the details of something that affects the budget significantly didn’t come out prior to the council tax  budget being set.

“It is a total black hole and they just dropped it in right at the end of the council meeting, which is completely and utterly outrageous."

Mr Pollard denied there had been an ulterior motive behind the timing of the libraries announcement, insisting the meeting's schedule had been rearranged for the benefit of Croydon Radio, which was broadcasting live from the chamber for the first time.

He said: “I can understand why they are cynical about it, but what we did in terms of the order of the meeting yesterday was a well-meaning attempt to actually make the Croydon Radio broadcast make sense."

The deadline for revised bids to run the libraries is now in April and the council expects to announce its preferred bidder in June.

John Laing this week insisted it was committed to a partnership with Croydon Council after the company announced it was stepping back from some joint ventures with local authorites to focus its UK business on transport, waste, health and renewable energy.

A spokeswoman for the firm said: "John Laing Integrated Services (JLIS) was delighted to have been announced as preferred bidder in December to transform library services in Croydon and has been working closely with Croydon Council to achieve commercial close. 

"The contract is an exciting proposition for JLIS and we very much hope to be able to move forward to work in partnership with Croydon Council for the benefit of local people.

"Our change of status within the bid reflects a last minute amendment to our proposal concerning pension arrangements that could not be mutually agreed."

Campaigner Elizabeth Ash, of Save Croydon Libraries, said: "I am agog that it could go so wrong at such a late stage, it is an absolute shambles.

"It is not saving money- it is going to cost a whole lot more, and it is not good for residents or staff."