COUNCIL TAX bills in York could soar by more than £120 next year unless millions of pounds of savings are found.

Residents will be urged to highlight areas where they think the city council can save money, in a bid to stave off the largest budget gap it has faced in recent years.

A hard-hitting report from finance chiefs says council tax bills in the city are set up to go up by at least six per cent next year - which would add an extra £49 to council tax bills for a Band D property.

But members of City of York Council's ruling executive will hear tomorrow that the rise could be high as 15 per cent - which would give a rise of £120 for Band D properties - unless millions of pounds-worth of savings are found.

A report from acting accountancy manager Julie Wright sets out a wide range of financial demands on the council during 2004-05, the worst being in education, where the "budget is under severe pressure".

She said the council must "develop an approach to what is the largest budget gap it has faced in recent years".

The report says the council will at best face a deficit of more than £5.6 million - at worse the figure could be £8.4 million.

Council leader Steve Galloway said today he was confident it would avoid that worst case scenario - which he said would add 15 per cent to bills.

"Basically the situation is that the budget is potentially £8 million in deficit, which means we have to either find additional income to close that gap or make savings to do the same, if we are to keep the council tax to the Government's proposed level.

"Our view is that the Government has grossly underestimated the costs of some services, and most dramatically so in terms of education. There have been a lot of difficulties for schools this year and it looks like it's going to be continued into next year."

He said that to meet this threat, his Liberal Democrat group's strategy was first to challenge the people of York to help target examples of waste, duplication and unnecessary expenditure which could be targeted.

"Some might be painful, but it's certainly better than arbitrary cuts in essential expenditure," he said.

The situation would be explained in ward committee newsletters next month.

The ruling group would itself be looking for savings and might target some "sacred cows" within the council, said Coun Galloway.

Thirdly, it would focus on local MPs "because they have a major role to play in getting the Government to increase their funding of local government in general and particularly York", which he said was one of the lowest spending unitary authorities.

York MP Hugh Bayley said: "When Labour ran the council, York had the lowest council tax in Yorkshire and some of the best services.

"I will keep fighting for Government money for York, but the Liberal Democrats must take responsibility for their own spending plans."

Updated: 10:49 Monday, September 15, 2003