YORK residents were today warned of a possible large hike in council tax after the authority announced it could exceed its budget by £2 million.

City of York Council leader Steve Galloway said the council would be doing everything it could to ensure service standards after a potential £1.9 million overspend was revealed.

But he warned that a substantial council tax increase was on the cards to meet the growing cost of providing those services.

The overspends - equivalent to about one per cent of the authority budget - have been particularly flagged up in three departments: education (£757,000), planning and transport (£447,000) and the community services directorate (£138,000).

Councillors who sit on the executive will receive full details of the potential overspend and the proposals to manage it at a meeting a week today.

The council says the extra spending in education is due to a higher than expected cost of supporting children in joint placements.

In planning and transport, lower revenues from city centre parking - combined with an 18 per cent increase in Park&Ride use - are behind the problems.

The overspend in community services is partly due to an increase in the number of children being fostered.

An officers' report states that "as much scope as possible will be needed to reduce the impact of service cuts and Council Tax increases".

Coun Galloway said the authority would be looking across the board to see where savings could be made.

"We have asked residents for suggestions and will be reviewing everything", he said. "We are asking council staff to help us in this process.

"It is my intention that there will be no cuts in the quality of services that York residents will notice and it also my intention that we avoid anything that results in compulsory redundancies."

Roy Templeman, the council's director of environment and development services, said the deficit in transport was due to the authority being a victim of its own success.

"It is due to lower use of existing car park spaces. We budgeted for the reduction in short-stay spaces, but this is down to fewer cars," he said.

"There is also the enormous increase and success of Park&Ride. That does cause us a (budget) problem but, as our objective is reducing congestion, it helps with our balance of transport provision."

Simon Wiles, the council's director of resources, said: "The projected £1.9 million is a significant overspend and if the preventative action is unsuccessful, it will need to be funded from the council's reserves.

"We will be reviewing expenditure to avoid waste and cut out any unnecessary activities in order to manage our expenditure with approved budgets."

Updated: 14:36 Tuesday, September 30, 2003