COUNCIL taxes could rise by almost 5% after the Chancellor eased restrictions on what local authorities could charge.

But Halton’s finance chief warned any rise would be a ‘drop in the ocean’ as the council tries to find more than £25m of savings over the next three years.

Jeremy Hunt took to the dispatch box to announce a raft of tax rises and spending cuts aimed at trying to plug a £55bn in the country’s finances.

One of the measures announced was raising the limit on which local authorities can increase council tax without triggering a local referendum. That figure had been two per cent for basic council tax, and an additional one per cent for social care precept - a total of three per cent.

That has now been raised to three per cent for basic, and two percent for social care - a total of five per cent. This means any council could hike council tax by five per cent without local voters having a say.

The council needs to find savings of £25m over the next three years, a figure that is broadly more than a fifth of the authority’s annual budget.

But addressing a meeting of Halton Council’s ruling executive board, the authority’s finance chief Ed Dawson said even if such a rise went ahead, it would be a ‘drop in the ocean’.

He told the meeting: “An additional one per cent only generates an additional £600,000 of council tax income for us, that relatively is a drop in the ocean for us.”

Mr Dawson, the council's operational director for finance, said that a proposed rise in the living wage would also impact the council as it would have to find the money to increase the pay of some staff at the lower end of the earning threshold.

He also told the meeting that the money the government had already agreed to provide each of its departments would not increase despite the impact of rising inflation, which he said would probably filter through to council spending.

He said: “last year government departments were given indicative totals with increases of 3.3 per cent over the following two years and then 1 per cent for the third year.

"What the chancellor has confirmed is that those increases will remain at that level - which when you see that inflation has now gone up to 11.1 per cent - means a significant net reduction in funding for those departments.

“And I think the worry for us is that that will work its way through into local government.”

But council leader Cllr Mike Wharton said there had been 'some' positive news, and that the council had generated a net surplus of £251,000 in the first six months of the year, in part due to the impact of rising interest rates on its current investments.

He added: “Overall it’s a positive position but we continue to be cautious.”