Ministers want councils to keep council tax increases below 2.5%

Tom McCabe detailed the rise of almost 6% to MSPs in the Scottish Parliament on Wednesday.

Mr McCabe said he felt council tax increases could be held at no more than 2.5% but councils warned that inflation had not been taken into account.

Umbrella body Cosla said authorities were looking at a realistic increase of 1%.

Prior to Mr McCabe's statement, Cosla had warned that many councils may have to increase tax levels by more than 4% to maintain public services.

Mr McCabe said central funding for Scotland's 32 local authorities has increased by almost half since devolution became a reality.

Local authorities would receive �8.3bn in 2006-07 and �8.5bn in 2007-08 to fund core services.

Money and time can no longer be wasted on unnecessary bureaucracy or inefficiency Tom McCabe Finance minister

Mr McCabe said the amounts would be enough to keep council tax increases low.

He said that funding had increased by almost �2.6bn over the past six years and added that by 2008 funding would have risen by about 55% since 1999.

Mr McCabe told MSPs: "For local communities, this means key services should be able to receive increased funding of more than �300m next year and �540m the following year.

"Whilst recognising these increases are lower relative to those we were able to provide in recent years, they must, of course, be considered in light of the wider context of our work to ensure the public sector is as efficient and effective as possible, notwithstanding some of the spending pressures local authorities are currently facing.

"Never before has it been so important for local authorities, as well as the wider public sector, to be innovative and rise to the challenge to bring long-term change in the way we deliver public services."

'Better services'

The finance minister went on to say that "money and time can no longer be wasted on unnecessary bureaucracy or inefficiency".

He added: "We need that time and money to be ploughed straight back into frontline services to ensure the people of Scotland enjoy better public services."

President of Cosla, Pat Watters, had previously pointed out that councils struggled in the past year to maintain services to communities while keeping tax levels low.

Giving his reaction to Mr McCabe's announcement, Mr Watters said the extra money was a mirage.

Tom McCabe has given no additional support to local authorities to meet the costs of many new burdens John Swinney Scottish National Party

He said: "When we strip out the additional money that comes for services that the executive says is a priority and that they are paying for, we are left with a 1% increase in funding at a time when inflation is running at 2.5% - that does not equate to additional funding.

"We will see a reduction in the overall funding.

"There will be more money, but less for services because of the way that the finance comes. Inflation has not been taken into account properly."

John Swinney, finance spokesman for the Scottish National Party, said: "Tom McCabe has given no additional support to local authorities to meet the costs of many new burdens and as a result council tax payers will be punished again."

David Davidson, Scottish Conservative local government spokesman, accused Mr McCabe of making assumptions about efficiency savings that Cosla disagreed with.

He said: "He ducked giving answers about where these savings would come from and what recognition he has given to councils that have managed to achieve them.