YORK'S council tax bills will rise by 2.9 per cent and frontline services will be cut after the city's ruling councillors sealed their budget plans.

Labour-controlled City of York Council voted to reject a £1.8 million Government grant which would have allowed council tax to be frozen in 2012/13 as the authority's budget for the next two years was thrashed out.

Anti-cuts campaigners demonstrated outside the Guildhall meeting, with one protester being marched out of the council chamber after interrupting proceedings to demand the council "takes a stand against the Government".

The budget - aimed at saving £19.7 million - means funding reductions for voluntary groups, ward committees and highways maintenance, increased car-parking charges, litter bins being removed, ending free black bin bags for residents and closing the Beckfield Lane waste recycling centre, as well as about 100 job losses in 2012/13.

A five-year, £28.5 million Economic Infrastructure Fund (EIF) - partly paid for by £20 million of borrowing - will be set up, while adult social care and looked-after children funding will be increased by £1.5 million and £500,000 respectively. A £2.5 million "delivery and innovation fund", branded a "vanity project" by opposition parties, will be created, while money will go towards disability facility grants, modernising council houses, improved streetlighting, a "community hub" for people with learning difficulties and disabilities, and a pilot pay-on-exit parking scheme.

Council leader James Alexander said taking the council tax freeze grant would mean much higher bills or deeper service reductions in 2013/14, adding: "It would be irresponsible and hit residents doubly hard.

"I didn't come into politics to make cuts, but the Government has forced them upon us. We are making the most responsible decisions for York, protecting services for the most vulnerable people and promoting jobs and employment."

Conservative and Liberal Democrat attempts to force acceptance of the Government grant and to scrap the EIF were voted down, with Conservative leader Ian Gillies saying: "Freezing bills would have contributed to the welfare and standard of living of York families, and it is morally wrong to penalise them.

"We will not help people seek out economic opportunities by borrowing and spending millions of pounds of public money. Plunging the city into debt without a plan is dangerous,"

Lib Dem leader Carol Runciman said increasing borrowing while slicing voluntary sector and ward committee funding signalled "a budget of inequalities which hits those least able to help themselves". Green councillor Dave Taylor said cuts to neighbourhood management services and the Future Prospects employment scheme, which his party failed to overturn, were "an unacceptable way of doing business" and criticised spending £200,000 on a new cycle track at the University of York.

The council tax decision means residents living in Band D properties will pay £31.63 more next year, with those living in Band C homes seeing a £28.12 increase, excluding fire and police charges and parish precepts.