A senior council leader has described a Government spending formula as "ludicrous" as he explained council tax payers were facing an inflation-busting rise.

Councillor Colin Anderson, leader of Sunderland City Council, attacked the Standard Spending Assessment (SSA), the amount the Government says authorities should spend on services, as he announced a seven per cent increase in council tax today.

The rise equates to extra charges of £42 a year for people in band A and £49 a year for those in band B, which make up 80 per cent of the city's houses.

It follows warnings of financial crises by councils throughout the North-East in the face of lower than expected SSAs for the next financial year.

As a result, council tax rates for the period, which are currently being announced, are spiralling.

Durham County Council, which covers Tony Blair's Sedgefield constituency, meets to discuss its budget tomorrow, and may have to increase its council tax by 17 per cent.

Mr Anderson said: "The whole mechanism for Government grants being delivered to local authorities is in disarray.

"The SSA is ludicrous. Our social services spending is ten per cent more than the SSA and we are one of the highest spenders on education in Britain, but we don't fulfil our SSA.

"We would like to see the money allocated on a basis of deprivation and need."

Despite the rise, Sunderland's council tax is still the second lowest in the North-East and the lowest in Tyne and Wear.

Coun Anderson denied that residents would suffer, with £300,000 being spent on a recycling project, £100,000 on Sunderland's Britain in Bloom entry and two new secondary schools being built.

He said the council was saving £400,000 in management costs.

"It has been a very difficult budget, but I think we have done extremely well," he said.

The budget will be ratified by councillors at a meeting on March 6.