SENIOR councillors said yesterday they were being "extremely cautious" in setting this year's council tax levels.

Arthur Barker, leader of Hambleton District Council, was speaking after the authority agreed a three per cent rise. It equates to a £2.23 a year increase for an average band D property.

Last year, the Government capped the council's budget after it announced a £12 a year rise, which went above the five per cent limit. The Government has not yet announced what this year's capping guidelines will be.

Councillor Barker said: "This will maintain our position as one of the lowest taxing shire districts in England. There are 238 shire districts and this will keep us in the bottom two or three.

"We have taken an extremely cautious approach as a result of capping because we don't know what criteria the Government will set until all the council taxes have been decided."

Last year's capping meant the council was forced to delay a number of projects and cut some services.

Two weeks ago, the authority announced that information points in Bedale, Great Ayton, Northallerton and Easingwold are to close to save £25,000 from the tourism budget.

Finance officers have warned that the council will have to use £1.7m from its reserves to balance its budget.

Coun Barker said the capping system did not punish councils that set high tax levels.

"Capping has caused us to revise our whole financial strategy," he said. "The Government is penalising lower charging authorities and rewarding those with higher taxes - that is what basing everything on a percentage does.

"We have had to take £1m out of our revenue budget and we are planning to take £100,000 a year out for the next several years."

He added: "We are consulting with the public, so we can see what the public's priorities are and see if we can address some of them.

"If they come back to us and say what their priorities are, we will see if we can free up some expenditure from other areas."