RESIDENTS in York may have to brace themselves for a sharp rise in council tax, Guildhall finance chiefs warned today.

City of York Council today called on the Government for more financial help as it warned the authority faced a "stark choice" ahead of the 2005/6 budget.

Unless a vastly improved grant is received from Whitehall, officers fear the council could be left with a funding black hole of several million pounds. They say this would leave York residents faced with either swingeing service cuts, meaning departments like education and social care could suffer badly, or a council tax hike to maintain service levels.

Last year's council tax rose by 8.5 per cent, leaving an average Band D property standing at £1,078. This was the tenth lowest in the UK.

Now officials say York is being underfunded by the Government to the tune of at least £7 million - the equivalent of a 14 per cent council tax increase.

Ministers would never allow the council to hike rates that high so, without extra Whitehall cash, councillors are faced with two unpopular options - increase charges or reduce service standards.

The council cash warning came as the authority today launched its "fair deal for York" campaign - aimed at securing better funding from central government.

Council number-crunchers say York finds itself squeezed between a declining level of Whitehall funding and increasing pressure to deliver improved services and respond to new Government initiatives in key areas like children's services and waste management.

Members of the ruling Liberal Democrat administration believe York is unfairly treated by the way local government funding and council tax levels are calculated.

They point to the fact that York is historically one of the lowest unitary authorities in terms of spending per head. York's spending per head on services for 2004/5 is £856.61 - only 80 per cent of the average for similar-sized councils across the UK.

Despite this, officials say, the council is the second most efficient unitary authority and has secured beacon status in education and housing.

Finance chiefs say the Government must be more flexible over the setting of council tax rates, allowing the authority to gradually close a funding gap rather than run the risk of capping through significant hikes.

Updated: 10:40 Wednesday, September 15, 2004