Council departments are facing tough decisions

Powys Council said its departments had been asked to identify savings of up to 10% as a result, although the final percentage cut is expected to be less.

The council is set to receive �170.6m next year, a 3.7% increase on this year but below the 4.3% Welsh average.

The assembly government said the settlement was a "good and fair deal".

A council spokesman said officials were expecting a �7m shortfall in next year's budget, which could effect how services are delivered.

Councillor Gwilym Vaughan, board member responsible for finance, said: "The provisional settlement announced by the minister is extremely disappointing and will cause considerable budget difficulties for the council.

The provisional settlement announced by the minister is extremely disappointing Councillor Gwilym Vaughan

"The settlement, which is well below the Welsh average, takes no account of the difficulty and cost of providing council services in a vast rural county like Powys."

The assembly government's minister for local government, Sue Essex, said she had worked closely with Welsh local government to "identify increases in costs and the need for expansion of particular local services."

"This settlement is a good and fair deal for both local government and council tax payers in Powys," added Ms Essex.