City of York Council is among 65 councils being warned it may face council tax capping.

But the Government's threats to step in and dock council spending were dismissed as "ridiculous" by council leader Steve Galloway.

Coun Galloway revealed City of York Council had been among the 65 councils to receive a letter from the Government carrying the threat to "cap" council tax.

The council proposed a 9.33 per cent rise on Monday.

North Yorkshire County Council, which yesterday proposed a 5.75 per cent council tax rise, received a similar letter last month. If a council was capped it would have to make drastic budget cuts at a very late stage.

Coun Galloway said: "York is the lowest spending unitary authority in the country and 13th of 352 in terms of its council tax. It is ridiculous to talk about capping a council like York. The Government should be getting on with reforming the council tax system. Alternatively, if they want to limit council tax they should be looking at high-spending local authorities not low-spending ones."

County council leader John Weighell today said he was unaware of any second capping letter being sent to the authority.

He added: "We believe we have done all that we could have done. We have done a vast amount of work to keep the council tax increase down."

Both leaders criticised the method used by the Office of the Deputy Prime Minister (ODPM) to decide on which councils would receive letters, as it partly used press reports indicating a council could make a large increase.

The ODPM has defended its methods, and said it used "reliable" press reports and council press releases.

Council tax bills went up by 11 per cent in North Yorkshire last year.

The proposed 5.75 per cent increase in the county council's share of the council tax will add £44 to an average Band D property bill in North Yorkshire.

The total county council precept is likely to increase from £817 in 2003/04 to £861 for 2004/05.

Coun Weighell said: "I think this is a reasonable balance between the services we need and people's concern over recent increases."

North Yorkshire's various district councils have yet to decide their council tax precepts.

The proposed 5.75 per cent county council share will be debated by full council on Wednesday, February 18.

Updated: 10:41 Wednesday, February 11, 2004