THE Government has warned York city bosses it would consider imposing a limit on its council tax increase if the local authority attempts to raise it by 7.5 per cent.

Local government minister Phil Woolas has told City of York Council leader Steve Galloway that such a rise "would leave the council at risk".

In a statement to a full meeting of the council, Coun Galloway told members he had received a letter from Mr Woolas concerned to "hear reports that the authority might be considering an increase of 7.5 per cent".

Coun Galloway had written to Mr Woolas urging him to visit York and witness the authority's achievements before deciding how much cash it would receive in the forthcoming financial year.

His letter warned that 2006 could see the "heaviest batch of cuts to services that we will have witnessed in the city" under current proposals. In its budget, the council is being forced in £6 million of efficiency savings and is arguing for an extra £1.25 million it says it is entitled to under new Government formula calculations.

But Mr Woolas' letter reveals he feels it is "proper to bring to attention Government policy in this respect. City of York Council's grant increase for next year will be 3.2 per cent" and an "increase of this nature would leave the City of York Council at the risk of capping action".

Mr Woolas also told Coun Galloway that the Government couldn't reveal whether the council would be capped until it had revealed its budget.

Coun Galloway said: "Many councils would find it really helpful if he could tell us what the criteria is before it is set.

"What is really irritating is that this council has the lowest council tax outside the south-east of England, and is getting banded in with these authorities that are raising 60 to 70 per cent more."

Coun Galloway said the city had been effectively punished because, unlike other councils, it had not imposed huge council tax increases in the 1990s.

Earlier, Coun Cederig Jamieson-Ball succeeded in passing a motion criticising the Government for failing to pay the extra £1.25 million "necessary to maintain public service standards".

But Labour leader Dave Merrett claimed the motion was "extremely unbalanced" and claimed the budget problems this year were of the Liberal Democrats own making.

Updated: 09:30 Wednesday, January 25, 2006