CALLS for an end to the controversial "capping" of council tax have divided politicians in York.

The Local Government Association (LGA) has backed a report by a Commons select committee, which has called for an end to the capping of council budgets by 2005.

But City of York MP Hugh Bayley said the Government should retain its power to cap local authorities when they put up their council tax too much.

He said he could not comment on the select committee's report, having not seen it, but told the Evening Press that in most cases he would prefer to avoid punitive capping measures because they were expensive to implement.

He added: "I think it's important for the Government to have it as a reserve power in cases where councils impose enormous tax rises."

Earlier this year, City of York Council, which raised its tax by 8.5 per cent, narrowly escaped being capped by Deputy Prime Minister John Prescott.

LGA chairman Sandy Bruce-Lockhart said: "Excessive rises in council tax are caused by the inadequacy of the current local government finance system and by central government spending demands, not by local councils."

York council leader Steve Galloway, welcoming the report, said: "Capping is not helpful for most authorities."

He said the "glass ceiling" imposed by central government had meant the council was forced to increase charges - such as the controversial parking charges - where it would have preferred not to.

The report also called for a reform of the local government finance system, under which councils currently raise a quarter of their income through council tax and receive the rest from central government.

Under the report's recommendations, councils would have control over raising 50 per cent of their budgets, instead of about 25 per cent, a proposal which Mr Bayley said he "strongly supported".

He said: "I would like to see a change in local government finance to give councils more control over their own spending."

Coun Galloway said he would like to see council tax replaced altogether with a variable income tax system and business rates.

"We would be wholly in favour of local people having more choice over how local services are funded and we welcome the report," he said.

Updated: 10:33 Monday, July 19, 2004