GOVERNMENT capping will cost a council £2.4m in lost income over the next three years, officials have said.

Local Government Minister Phil Woolas ruled that Hambleton District Council should have its budget capped in July after the authority set a council tax level of £80 a year for band D properties.

The 17.6 per cent increase was higher than the five per cent limit laid out by the Government, but still much lower than the target of £182 a year for district councils.

Officers at the council have had to draw up a new financial strategy to deal with the effect of the capping.

It predicts that over the next three years, the result will be a loss of income totalling £2.4m.

The strategy will see a £180,000 cut in spending on repairs and renewals and a reduction of spending on computers by £293,000.

A number of short-term schemes have already been deferred until the new financial strategy has been completed, including £36,000 for street cleansing, £20,000 for young people's travel, £51,000 for street wardens and £17,000 for security cameras.

Householders will receive adjusted bills this month at a cost of £30,000 to the council.

Phillip Morton, the council's director of resources, said the Government's decision to cap Hambleton had forced a fundamental rethink of finances.

"The effect of the Government's decision to cap the council has had a profound effect on the council's financial strategy," he said.

"While the immediate decision to cap the council will result in a short-term budget reduction of £196,000, it is the longer-term implications that will have the greatest impact.

"There is a need to move expenditure from revenue to capital and to make significant cuts in the base budget.

"However, a new strategy is proposed which is sustainable for the next ten years.

"The council is under no obligation to have a ten-year financial strategy. However, not to do so would detract from the good reputation for financial management the council enjoys."

Mr Morton has recommended that the cabinet backs the strategy at its meeting on Tuesday.

If it does, the strategy will be used as a basis for consultation before going to the full council later this year