COUNCIL tax in York should be set as high as possible to minimise devastating cuts to vital everyday services, a top official has warned.

Cash-strapped City of York Council faces a £14 million shortfall within two years, leaving vital everyday services under increasing threat, the ruling executive has been told.

In a hard-hitting budget report, the council's director of resources Simon Wiles expressed "serious concerns" about the future, and said if it were not for the threat of capping, council tax increases should be even higher than the inflation-busting 4.95 per cent proposed.

Mr Wiles said he feared for future budgets, and expressed concern about the council's pension fund deficit, which now stands at more than £95 million.

He said the authority's position was "increasingly difficult" and wrote: "The council is struggling in terms of its capacity to deliver, while significant annual savings and cuts have to be implemented."

While the proposed 2008/09 budget balances, Mr Wiles and corporate finance manager Janet Lornie projected shortfalls of £7.3 million in 2009/10 and £13.8 million the following year.

Mr Wiles said services may need to be redesigned or delivered in "different ways" in future. The council has already said services should be provided by "whoever can best meet" customers' needs.

The officers' comments came as the proposed 2008/09 budget was presented to the executive. Liberal Democrat council leader Steve Galloway will next week present his party's own proposals, which will then go before the entire council at a crunch meeting on February 21. If the Lib Dems fail to win support for their budget, they could lose control of the council.

For now, all four parties are keeping their cards close to their chests.

Coun Galloway said the executive was "carefully considering" the responses to the council's budget consultation leaflet, adding: "I am pleased with the response to the public consultation with over 6,000 residents now having returned forms and many more having completed the survey on line."

Tory leader Ian Gillies said: "The Conservative group has been looking very carefully at the officers' proposed budget with an eye as to where the council can eliminate waste and provide best value for residents.

"Ultimately we will be in a position to decide if we support this budget, or an alternate budget as may be proposed, depending on what they finally contain and whether the amendments we may propose are accepted."

He said the budget process had been made harder by the Government passing on under-funded or unfunded commitments to councils.

Unison recently launched a stinging attack on budget proposals in social care, which they said would damage care for some of society's most vulnerable people.

The union's branch secretary, Ben Drake, called those proposals "appalling" and today said: "We appreciate the difficulties at the council, but we continue to say they must not cut care services to the most vulnerable people."