Council taxes rose by an average 5% this year

Two of the smallest authorities were revealed as the biggest "hoarders" of council tax cash.

A report by Audit Scotland revealed that Orkney and Shetland held �500m in their reserves in 2002/03.

As a whole, the country's 32 councils had �839m in reserves, compared with �686m in 2001/02.

The Accounts Commission's Alastair MacNish described the figures, which included Shetland at �379m and Orkney at �185m, as "high".

With 15% of council income coming from council tax, the scope for cuts is massive Brian Monteith Tory MSP

Earlier this year, councils increased council taxes by an average of about 5% across the country.

Conservative finance spokesman Brian Monteith said that when put alongside �550m in uncollected council taxes, the reserves could have paid for a reduction in this year's bills.

Mr Monteith said: "This highlights the fact that the debate over what we call the tax misses the point.

"It is the level of council tax that causes so much avoidable pain. With 15% of council income coming from council tax, the scope for cuts is massive.

"Labour taxes are too high and the Lib Dem and SNP local income tax plans would cost thousands of Scots more of their hard-earned money.

"They are the high tax, low return parties. Scotland has suffered enough."

'Unforeseen events'

And Scottish National Party finance spokesman Fergus Ewing said the findings showed the authorities were keeping too tight a grip on their resources.

Mr Ewing said: "This money may be intended for a rainy day, but for hard-pressed pensioners it's already raining."

He went on: "This will prove to be a PR disaster for councils.

"They now have to explain to Scotland's pensioners, and all council tax payers, why their bills went up yet again this year."

But a spokesman for the local authority umbrella group Cosla defended the high level of reserves.

He said: "That kind of level of reserves shows that councils are taking a prudent approach to financial management.

Shetland Council's cash reserves were highlighted

"Councils have to take account of unforeseen circumstances and areas such as pensions, which require fairly good reserves to ensure we are not caught out at the end of the financial year."

The report also revealed that housing and council tax fraud in 2002/2003 was �5.3m compared with �6.5m the year before.

Auditors have also pledged to keep council pension funds under review after falls in the stock market saw them lose about 20% of their value in 2002/2003.

Elsewhere, the report said Scots councils had continued to improve their financial performance.

But it called on more councils to make full use of audit committees to keep a close eye on how their budgets are being handled.

And it also said councillors should receive detailed information on their authority's financial performance more quickly.

Councillor John Pentland, Cosla's financial spokesman, welcomed the report.