Council tax increases have provoked anger

The move will cost about �250,000 - to refund an authority overspend of �180,000 against a total budget of �350m.

The city council said they had done everything they could to stay within the government's spending limits.

But Local Government Minister Nick Raynsford said the council had been warned it could be capped.

Councils should keep their councils tax increases down and had they done so they would not be facing this particular situation Nick Raynsford, Local Government Minister

The rise of almost 10% had already attracted protests from people who said they could not afford the increase.

But Jon Collins, the leader of Nottingham City Council, insisted they had complied with the government's instructions.

He said: "We were in constant contact with government officers locally, they were aware of the kind of budget we were setting.

"We asked time and again, 'was that acceptable?' was that reasonable and we got reassurance, after reassurance, after reassurance.

"Our MPs asked the same questions and got the same reassurances."

Mr Raynsford said: "Councils should keep their council tax increases down and had they done so they would not be facing this particular situation.

"It is only because councils set increases above 8.5%, and those are very significant increases, after we made it very clear we expected them to budget for low single figure increases."