COUNCIL Tax increases in Huntingdonshire are likely to be pegged at five per cent next April in the face of further threats of Whitehall capping. The move will throw into further disarray the district council's plans to stave off a hike of more than 50 per cent in 2008\/09. HDC decided two years ago that, rather than continuing to subsidise Council Tax from \u00A380 million reserves built up when the council housing stock was sold to social landlord Huntingdonshire Housing Partnership in 2000, it would increase the tax by \u00A31 per month for the foreseeable future. That would free up the capital to provide interest income until it was needed for major capital projects or improvements in services. Typically, the interest has been providing \u00A32.5 million a year - equivalent to around 40 per cent of the amount raised by Council Tax. The \u00A31-a-month strategy worked fine in the first year, even though it represented an increase of over 14 per cent. It escaped capping because Council Tax in the district was way below the national average. Even now it is in the bottom 20 of the 240 district councils in England. But last year, when the same cash sum represented a 12 per cent rise, Whitehall said no. Ministers made HDC restrict its budget increase to 5.7 per cent - the \u00A3387,000 was not much of an issue for a single year - but the re-billing cost \u00A360,000 for an average saving for each Huntingdonshire household of less than \u00A37 a year. The Government had changed the capping rules. Every time a cap is imposed, the next \u00A312-a-year increase ratchets up the percentage rise because it is a higher proportion of a smaller number. In one sense, the controlling Conservative group has only itself to blame - and Cambridgeshire County Council, which is also whingeing constantly about inadequate central Government support, is in just the same position for the dilemma, which stems from a parsimonious attitude to local services in the Thatcher and Major years. Then, both councils decided to restrict local services to keep Council Tax as low as possible. Since then, they have realised that people are prepared to pay more for better services if they are provided efficiently. But HDC was slow off the starting blocks. With a benchmark Band D tax of just under \u00A3100 a year, the five per cent limit generates just \u00A35 from the average household. In Ipswich, where Band D taxpayers are already paying \u00A3265 a year, councillors will be rubbing their hands with glee at the prospect of more than an extra \u00A313-a-year without any risk of Government intervention. But what makes HDC really cross is the way central funds are allocated to councils and a system of "floors and ceilings" that penalise low-spending councils in expanding areas to subsidise high spenders in depressed economies, where demand for council services is much higher. Every year, the Government assesses what every council in the country needs to spend. This coming year (from April) HDC should be entitled to \u00A3544,000 more than it will actually get - far less than the proposed increase in Council Tax and almost enough to fund the planned \u00A31-a-month increase in full. HDC has accumulated underpayments - money it says is owed by Whitehall, but has been paid to industrial towns in the north instead - of more than \u00A35million, almost enough to give this district's taxpayers a year off from paying Council Tax to HDC completely. But that will not happen. The county council reckons it is owed around \u00A312million in withheld central Government funds over the years. It argues, quite reasonably, that, as the fastest-growing area of the country, it needs more money to provide extra services for more people. But local government finances do not work like that. They are based on last year's data, not next year's predictions.