Tom McCabe said council tax rises should be minimised

Finance Minister Tom McCabe announced that councils are to receive a 4.7% increase (�393m) on last year's funding levels from the Scottish Executive.

This includes �201m in new money, with additional revenue resources of �140m.

The increases were welcomed by local authority body Cosla, which hailed it as a victory.

However, Mr McCabe warned that councils faced losing out on future funding increases if they failed to meet a series of assurances on issues including efficiency savings and free personal care.

He said that central to that was a commitment to minimising council tax rises.

If we were in a position where a council was to increase its council tax by 10%, then we would take action on that Tom McCabe Finance Minister

The minister said he wanted to see councils doing "better than last year" when the next levels are set in April.

"There's certainly a threat that if the different elements of discussions we held with them over the past few months are not met, then we would revisit our discussion with regard to funding," he said.

"If we were in a position where a council was to increase its council tax by 10%, then I've said before and I'll say again we would take action on that."

But he said that if councils are meeting these conditions, then the additional revenue resources of �140m will be included in future local government budgets for 2008/09 and beyond.

Business rates

Council tax rises averaged 3.2% across Scotland this year.

Cosla president Pat Watters said the announcement was a "major win" for Cosla and the result of the "new mature partnership" between local and central government.

"It is also justification for the amount of hard work and effort put into the process by Cosla on behalf of Scottish local government during the last two years," he said.

Pat Watters said the increase was a "major win" for Cosla

On free personal care, Mr McCabe said that ministers and councils will work together to establish what is being spent so people across Scotland receive the same high standard of service.

But the SNP's John Swinney said councils should be allowed to keep money from efficiency savings, allowing them to freeze council tax rates - something the SNP pledged to do.

He warned that if it did not happen Mr McCabe would "preside over yet another punishing increase in the council tax".

The minister also announced that, from April next year, business rates will be cut to bring Scotland in line with the position in England.

The minister added that the small business rate relief scheme would continue in its present form.

Tory finance spokesman Derek Brownlee welcomed the reduction but added: "Can he perhaps confirm how much extra Scottish businesses have paid in business rates as a result of his executive's decision to increase business rates in the first place - is it around �1bn?"