CUTS in essential services could be made next year after council chiefs revealed that they are wrestling with a major budget dilemma.

North Yorkshire County Council is warning that early predictions suggest residents could be faced with a council tax increase of just under seven per cent.

Councillors and officers are now working on tough budget decisions, even though the Government has announced an average increase of five per cent in what local authorities can spend.

Key factors which the authority must contend with include teachers' pay - which is rising faster than inflation and accounts for a quarter of the budget - and a major backlog of repairs on its 6,000-mile roads network.

Improving standards in education will also prove costly, with an extra 1,200 pupils to be educated in North Yorkshire's schools at an average cost of £3,000 each.

More teachers and support staff are needed to bring about reductions in class sizes, while installing the latest technology in schools will also be expensive.

Social services chiefs will have to adhere to minimum standards for staffing levels, and the county's ageing population will need more home and residential care.

Council leader David Ashton said: "We expect a grant increase of about £11m. However, inflation alone - including that relating to teachers' pay - will push up council costs by about £13m and the Government's own assessment is that North Yorkshire County Council spending should increase by almost £19m.

"This will inevitably result in council tax rises which are higher than inflation. Cuts in some services may also be a possibility."

The authority says it will be consulting widely on its options for next year, but at this stage, a council tax increase of 6.9 per cent - expected to be average among the shire counties of England - is likely.

North Yorkshire achieved the fourth-lowest increase among county councils last year, but cash reserves this year have been wiped out by the recent flooding disaster