YORK residents will have to dig deep, after city leaders agreed an inflation-busting 5.49 per cent council tax increase.

City of York Council's budget, branded by leader Steve Galloway as the "most difficult" for many years, was approved by councillors - meaning the average York householder will have to pay £1,173.71, including charges from the police and fire service.

The authority has been forced to find £5 million of efficiency savings in the light of what the ruling Liberal Democrats claim is inadequate Government funding.

Coun Galloway said the council had faced a "budget challenge" which meant it had to find more than £14 million, of which only £2.75 million had been met by the Government and just over £3 million from council tax.

He said that for the third year in a row the Audit Commission had announced the council had improved its service quality.

"I don't believe that the majority of residents in the city fully appreciate quite what an achievement that has been," he said.

"The imposition of additional duties on the council (without full supporting funding), higher taxation levels, uncontrollable pay pressures, above inflation cost increases, or an increased volume of demand for services could each, or severally, precipitate a budget crisis.

This year, all those factors, and more, have impacted upon us at the same time."

But Labour opposition group leader Dave Merrett said the council was now seeing the "true picture and cost of the Lib Dem incompetence" and accused them of failing to take responsibility for their actions.

He said: "Council finances are in a mess. Residents face significant cuts in services. Will this administration take responsibility? No. It is just one excuse after another."

But Coun Galloway attacked the Labour group, after it had decided not to propose an alternative budget, accusing it of being "totally and entirely redundant".

Earlier, Unison chief Heather McKenzie had addressed councillors of her "serious concerns" about the budget proposals.

She said although the cuts in services and jobs, with as many as 100 posts lost as a result of the budget, had not been wholly of the authority's making, she was nevertheless "appalled" there was no apparent strategy to deal with them.

"Full and proper consultation with users and staff has not taken place," she said.

"Despite that, council members are still making changes which will have a lasting impact. Some of these, far from saving money, will have an added cost."

Amendments to the budget proposed by Green councillors, including a proposal to charge to park in Park&Ride sites.

Updated: 09:30 Thursday, March 02, 2006