A COUNCIL will be £21m in debt by 2014 if it does not cut spending, senior officials have said.

Reserves would be gone in three years and residents would face a 90 per cent increase in council tax to maintain services.

Hambleton District Council has been forced into a radical rethink of its budget after being capped by the Government. Ministers ruled that a proposed 17.6 per cent rise in council tax this year would be excessive.

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

Cabinet members have already reset this year's budget to find the £196,000 of income lost through the capping order. On Tuesday, members approved a new draft ten-year financial strategy.

The authority's financial experts have said that without a fundamental rethink of their budget, reserves to fund major schemes and keep council tax low will be gone in three years.

At the current rate of spending, the authority would be £21m in the red by 2014.

Council leader Councillor Arthur Barker said: "It is not just the budget savings of £196,000 we have to make this year to cope with the capping judgement, but the compound effect of it year on year.

"In one fell swoop, capping has destroyed our future plans. If we maintain spending at current levels our reserves will be gone within three years.

"At that point, we would be faced with a 90 per cent increase in council tax to maintain current services - an increase that is simply not an option."

Nine schemes proposed for the 2005/06 financial year have been put on hold and some planned for future years are likely to be scrapped.

Coun Barker said: "We have some tough decisions to make - made even harder when we take into account a survey of Hambleton residents conducted two years ago.

"That concluded that most of them were willing to pay up to £20 extra a year in council tax to get the additional services and schemes that we are now looking to defer."