Council tax payers in North Yorkshire face a seven per cent increase in their bills - and that still won't be enough to fund schools at current levels.

County councillors who approved the tax hike said school budgets were likely to fall by one per cent in real terms despite the increase and a £100,000 Government grant for education in the county.

Councillor David Ashton, leader of North Yorkshire County Council, said that this fall could be even greater if teachers' pay rises by more than 3.3 per cent.

He was speaking after members of the county council cabinet met to finalise budget proposals for next year and agreed to a rise in council tax bills of seven per cent though their recommendations must be ratified by the full council on February 21.

Education Secretary David Blunkett yesterday announced a £100,000 grant each to education authorities in North Yorkshire and the City of York, but Coun Ashton was still downbeat.

He said: "We are not able to increase school budgets by as much as we would have liked.

"In real terms, core budgets in schools may fall by almost one per cent next year and this is likely to increase if teachers' pay rises by more than 3.3 per cent.

"However, schools will get extra cash on top of this through the standards fund and in direct grants from the Government.

"Much of that, however, is for specific purposes and provides no solution to the erosion of core budgets."

The council tax hike will create a 'corporate pot' of £1.25 million, of which about £700,000 will benefit social services and virtually all the rest education.

But the council tax setting could rise even further if the county council is asked to provide more than expected for the regional flood defence levy.

Coun Ashton said: "North Yorkshire has one of the lowest council taxes in the country and our objective is to stay that way.

"In terms of council tax charges, we aim to remain in the lowest 25 per cent of county councils. This means taking tough decisions in a variety of areas.

"We face increasing pressure on our road network. We also have to meet all the extra costs of the Government's landfill tax."

However, the council tax hike will make a big difference to voluntary organisations in the county which will receive £165,000 from the social services budget.

"This will mean no reduction in funding for preventative and personal support schemes in the voluntary sector," said Coun Ashton.

Commenting on other features of the budget proposals, he added: "We face significant difficulties in providing enough resources for residential care of elderly people. Our budget proposals will enable our current target of 25 placements a month to be increased to more than 30."

"We will also be able to increase the amount paid to private care homes by slightly above the rate of inflation.

"This will help make up for last year when the increase we paid was fractionally below.

"Like most councils, our social services units will be overspending this year. Our objective is to achieve a balanced budget next year.

"We will be undertaking a thorough financial review aimed at producing proposals for a long-term solution to the problems we have faced since the Government cut £3.5 million from our social services budget in 1998."

Updated: 08:27 Tuesday, January 30, 2001