YORK can avoid capping and the huge cost of rebilling residents if it limits its council tax rise next year - and submits to the Government's "nomination" process.

MP Hugh Bayley was given the news at a meeting with local government minister Phil Woolas to see whether a compromise can be reached over Whitehall's threat to restrict City of York Council's budget.

Mr Woolas is due to meet council leader Steve Galloway and chief executive David Atkinson on May 11 to discuss York's position.

But Mr Bayley said he had made significant progress with the minister, and was hopeful the authority would be able to come to an agreement with the Government.

In The Case For York, the dossier the authority sent to Whitehall, the council asked Mr Woolas to take no action - allowing it to retain a 5.49 per cent increase in council tax this year, and follow up with 4.5 per cent for 2007/2008.

The Press sent an open letter to Prime Minister Tony Blair asking him to drop the capping threat on the grounds that the council was one of the country's lowest spending, and lowest council tax authorities.

That letter was included in the bundle the authority sent to the Government.

Mr Woolas told Mr Bayley he is bound to either cap the council or officially nominate it - a legal agreement committing the council to cut its spending. He gave the MP no indication whether a 4.5 per cent rise would be

acceptable.

Coun Galloway said he was unconcerned by the prospect of nomination, as the authority had already indicated it would reduce council tax next year.

But he said it would mean "more bureaucracy, more form filling and more

interference from central Government in local affairs".

Mr Bayley said: "The council will be able to avoid capping and the extra cost of rebilling, if it agrees to limit the council tax rise next year and submit to the Government's nomination powers - which gives the minister a legal guarantee.

"I hope the council will take a cross party delegation and that it goes prepared to discuss the administrative arrangements for making nomination work."

Coun Galloway said: "Whether we are nominated or not makes little difference to us. If I get confirmation of this on May 11, that would be one way of dealing with the threat of capping."

Updated: 09:22 Wednesday, April 26, 2006