LOCAL authorities may be forced to increase council tax bills to make up for any shortfalls in Government funding.

Councils are busy analysing budgets after figures were released yesterday showing the amount of provisional grants each authority has been awarded for 2004/5.

Although many councils said it was too early to predict whether council taxes would rise, some are not ruling out substantial increases.

Redcar and Cleveland Borough Council said it may not be possible to avoid a significant council tax rise and City of York council branded its settlement as poor.

Local Government Minister Nick Raynsford announced a national package of £54.1bn for local authorities, an increase of 6.5 per cent on last year.

Outlining the provisional settlement in the Commons, he warned it meant large council tax increases could not be justified.

Double figure rises would be unacceptable, he said, signalling that ministers would use capping powers if necessary to protect the interests of council tax payers.

Glyn Nightingale, cabinet member for corporate resources at Redcar and Cleveland council, said: "It is too early to know in detail what it will mean. It may not be possible to avoid a significant council tax rise."

Members of North Yorkshire County Council said they faced a number of difficult decisions before resolving the authority's budget for the coming year.

Chief executive Jeremy Walker said: "The provisional settlement provides less money for roads and transport than in the current year.

"Schools and the education service will continue to face real difficulties, particularly for support services such as school transport."

The county council plans to present a draft budget before Christmas, which will then be the subject of public consultation.

Figures were also released for 2004/5 for grants awarded to the region's police and fire authorities.

Cleveland, Durham and North Yorkshire police have all received an increase of 3.3 per cent on last year.

Patrick Melia, Durham Constabulary's director of finance and administration, said: "Our initial reaction is one of considerable disappointment."

A spokesman for North Yorkshire Police Authority said that while it was slightly better news than expected, urgent work with Chief Constable Della Cannings would take place to discover what it would mean for council tax levels.