FINANCE chiefs at York council are facing a £2 million budget deficit.

That is the figure left to find next year, after the authority learned how it much it would get from the Government in grant funding.

The Evening Press reported yesterday how residents faced either a council tax rise of 7.5 per cent or cuts in services, after the Government recognised York had not been given a fair deal in grants, but withheld an extra £1.25 million which could have helped close the authority's budget gaps.

City of York Council has received a 3.2 per cent grant increase - taking its total to nearly £36 million. It could have had the extra money, based on its needs, but the Government has delayed handing over the cash.

Council leader Steve Galloway said: "As this would have meant taking funding away from councils that have been overfunded in the past - the Government is to phase-in the transfer."

He told the Evening Press the decision was "grotesque", and planned to make representations about the matter.

Today, he said a projected £10 million funding gap, revealed in October, was now about £2 million - and the council would ensure it balanced its books.

"We will find a way of saving that amount of money. We have to. It will be another tough budget, but we have been working on it for the past three months," he said.

Meanwhile, North Yorkshire County Council's leader, John Weighell, said the authority would rise to meet the "difficult budget challenges" resulting from the Government's announcement of local spending.

Figures were not released, but Coun Weighell said: "At the end of the day we are left with a limited amount of money determined by the Government that has to be distributed across a wide range of important public services.

"Over the next few days we will be analysing the detailed implications of the Government's announcement for North Yorkshire. Once that is done we will be able to start making difficult budget decisions."

Council chiefs in the East Riding of Yorkshire were equally unhappy with their grant settlement. The authority announced its formula grant increase was £1.9 million - taking its total grant for next year to £78.7 million.

That equated to an increase of 2.4 per cent.

Council leader Stephen Parnaby said: "Councils are again left with having to find budget reductions, or putting up council taxes and running the risk of being capped."

Updated: 11:26 Wednesday, December 07, 2005